Competition among investors for commercial real estate properties is increasing despite high borrowing rates. In June, bidding activity for properties showed its strongest monthly improvement in a year, while in July the number of unique bidders became the second-highest in the five-year history of the relevant JLL index, CNBC Top News reports.
According to JLL, competition among lenders is also exceeding previous record levels. Financing is entering the market more actively through commercial mortgage-backed securities, insurance companies, government agencies and debt funds. In the first years after the pandemic, the availability of such lending was lower due to problems in certain commercial real estate segments, and since 2022, because of higher interest rates.
Lending supports bidding
Lauro Ferroni, head of capital markets research for the Americas at JLL, noted that the gap between the lending and bidding intensity indices is narrowing. According to him, the credit activity index is ahead of the bidding activity index because loan availability determines the level of market liquidity.
Ferroni linked the recovery to the volume of active capital, which, in his view, counteracts macroeconomic uncertainty and volatility. He also said that lenders are returning to the sector because there has been no significant wave of distressed assets or defaults.
More current news is available on the UA.News Telegram channel Telegram.
Greatest interest in retail and industrial properties
Investors are competing most actively for retail and industrial real estate. Owners of retail properties are in no hurry to sell them because of the income they receive, which intensifies competition among buyers, JLL noted.
Industrial real estate remains attractive due to the development of e-commerce, as well as the relocation and expansion of manufacturing closer to the United States. According to CBRE, leasing of manufacturing space increased by 27% year-on-year.
Multifamily residential real estate remains the weakest sector in terms of bidding and lending activity. The sector is adapting to a historically large volume of new construction. Although the overall vacancy rate in the country is declining, vacancy in stabilized properties, excluding buildings at the initial lease-up stage, increased by 34 basis points in the second quarter, according to CoStar.
Download our app
