RCA Insights

US No Longer the Global Leader for CRE Investment

By on August 20th, 2020

In normal periods the U.S. is the largest, most liquid region for commercial real estate deal activity worldwide. In the second quarter, however, Europe surpassed the U.S. as a hub for investment. Trends into July are not looking favorable for the U.S.

Commercial real estate exists to support the needs of a local economy and deal volume can be a sign of the expectations for the health of that local economy. Expanding that view from the perspective of a local market to that of a national and regional view, the commercial real estate data suggests that there is less confidence in the U.S. at the moment.

The last time deal volume in the Europe regularly surpassed that of the U.S. was during the Global Financial Crisis. The U.S. housing market was the spark that set off that global economic downturn and confidence in the U.S. economy lagged for some time after that recession ended. A single large entity-level transaction boosted quarterly European deal activity ahead of that of the U.S. in late 2017, but otherwise the U.S. has been a larger investment market.

As the U.S. slipped into recession in March 2020, commercial real estate investment plummeted. In the second quarter, U.S. investment volume for deals priced $10 million and greater slipped behind those in Europe by $19 billion.

Granted, the U.S. dollar has fallen versus the euro, amplifying the value of European transaction volume when converted into dollars. Even if Americans could fly to Europe today, now is not the time for a European vacation, with the U.S. dollar currently buying only €0.85 versus €0.92 in May. Most of the slide in the dollar, however, has happened only since late May.

The issue faced in the U.S. today is the uncertainty around the economic fallout from a harsher impact from Covid-19. In mid-August, daily deaths from Covid-19 in the U.S. were nearly 10 times greater than that in the European Union, a region with roughly 120 million more people than the U.S.

With a harsher public health situation in the U.S., investors face greater uncertainty around underwriting future income trends for a property. The social safety nets of European countries can look more expensive, but in a time of crisis, they can also help investors understand how economic losses will be distributed.

Preliminary figures for July show a continuing high double-digit annual decline in U.S. deal volume. If there is one silver lining in the preliminary data, deal volume for the month is still higher than $10 billion, while in 2009, deal activity averaged only $6 billion per month over the full year and nearer $5 billion for July. So while conditions in the U.S. are poor, as of yet, investment activity is not as bad as the last downturn.

US Capital Trends will be released August 26. This edition details deal activity and pricing across the property types in July. If you are not yet an RCA client, contact us to learn how RCA’s reports, data and tools can inform your investment decisions.


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Jim Costello

Jim Costello

Executive Director, MSCI Research

Jim is chief economist on the MSCI real estate research team and is based in New York. He previously led the U.S. research team at Real Capital Analytics, which MSCI acquired in 2021, and spent two decades at Torto Wheaton Research, working in urban economics. He is the lead author of the US Capital Trends publication and a frequent speaker at commercial real estate conferences. Jim holds a master’s degree in economics and is a member of the Commercial Board of Governors of the Mortgage Bankers Association.