Challenges Remain for Global Real Estate, But Opportunity Still Exists

With social distancing coming to the forefront, it’s reshaped commercial real estate as more companies are forcing their employees to work from home. While Covid-19 is presenting challenges for commercial real estate around the world, there are still opportunities that exist for exchange-traded fund (ETF) investors.

“The impact of the COVID-19 pandemic is being felt in global real estate markets, with commercial real estate investment volumes falling across all three regions in the first half of the year,” noted The Investor article. “Direct commercial real estate investment fell 29 percent globally to $321 billion in the first six months of 2020 compared to the year-earlier period, according to data from JLL. The drop came amid widespread lockdowns and travel restrictions that stalled investors’ short-term capital deployment plans.”

“Cross-border investment has slowed significantly with travel restrictions, in particular inter-regional investment which declined by 61 percent during the second quarter. Those markets that are more reliant on foreign capital are feeling the effects, resulting in steeper activity declines,” said Sean Coghlan, Head of Research, Capital Markets, JLL.

Investment volumes fell across all parts of the globe—the Americas, Asia Pacific and Europe. While a recovery is expected, analysts expecting varying degrees of a rebound.

“Activity in the U.S. and Europe will continue to be subdued in the coming months,” said Coghlan in the article. “But investor sentiment is beginning to shift toward deal sourcing, and transactional pipelines are beginning to rebuild.”

Exchange-traded fund (ETF) investors who want to take advantage of the forthcoming changes in real estate can look at the FlexShares Global Quality Real Estate Index Fund (GQRE). The fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust Global Quality Real Estate IndexSM. The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to quality, value, and momentum factors relative to the Northern Trust Global Real Estate Index.

GQRE Chart

GQRE data by YCharts

Another fund to check out is the Xtrackers International Real Estate ETF (HAUZ), which seeks investment results that correspond generally to the performance of the iSTOXX Developed and Emerging Markets ex USA PK VN Real Estate Index. iSTOXX Developed and Emerging Markets ex USA PK VN Real Estate Index is a free-float capitalization-weighted index that provides exposure to publicly traded real estate securities in countries outside the United States, Pakistan, and Vietnam.

For more market trends, visit the ETF Trends.