Housing block in Warsaw, Poland
Busà Photography | Moment | Getty Images
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After a pullback in commercial real estate activity earlier this year due to broad economic uncertainty, there are new signs that activity is on the move again.
Capital is increasing and “bidder dynamics” are stabilizing, according to JLL’s global Bid Intensity Index, which saw improvement in July — its first since December.
The index measures bidding activity in order to give a real-time view of liquidity and competitiveness in private real estate capital markets. That, in turn, is an indicator for future capital flows across investment sales transactions.
It is composed of three sub-indices:
Bid-Ask Spread: Final winning bid vs. the asking priceBids per Deal: Average number of bids per dealBid Variability: Pricing variability of final bids
The stabilization in bidding dynamics comes as property sector performance fundamentals are holding up and asset valuations have generally held firm so far this year, despite weaker investor sentiment, according to the report.
“With no shortage of liquidity, institutional investors are returning to the market with more capital sources and a renewed appetite for real estate,” said Ben Breslau, chief research officer at JLL. “While further recovery is expected to be gradual after moderating earlier this year, borrowing costs and real estate values in most markets have stabilized, so we expect momentum to pick up through the second half of the year.”
Bid-ask spreads, the difference between the highest price a buyer is willing to pay for an asset and the lowest price a seller is willing to accept, are narrowing to more healthy levels across multiple sectors. The sector seeing the most improvement is so-called “living,” which is largely multifamily apartments but also includes senior living and student housing.
Retail is doing better than last year, but has been in decline over the last few months as tariffs weigh heavily on that sector. Industrial is the biggest laggard, thanks to supply chain uncertainty also muddied by potential and real tariffs.
Office bid dynamics are showing improvement, driven by a growing number of bidders and more lenders quoting on office loans. Some have called a bottom to the office market after its Covid-induced crash. Investors are bargain hunting in some cases, but as fundamentals strengthen with more return-to-office, overall deal demand is rising.
Bottom line: Investors appear to be accepting uncertainty as the new normal, according to the JLL report. Bloxam said that includes accepting higher risk.
“The attractiveness of CRE investments as a long-term store of value remains intact. As more investors move to a ‘risk-on’ mode, coupled with the exceptionally strong debt markets, we expect this will lead to continued growth in capital flows,” he said.
