Positive sentiment slows, but steady upturn in market activity remains finds Avison Young Commercial Real Estate Market Activity Index

The latest results of Avison Young’s Commercial Real Estate Market Activity Index show moderating positive sentiment across multiple industries, possibly reflecting concern over an increase in COVID-19 infections in some parts of the world, but a continued slow, steady upturn in real estate sector activity. The index takes a regular pulse on what the firm’s leading practitioners are seeing and hearing from investors, owners, occupiers and developers across the private and public sector.

While the rate of improvement in market sentiment has moderated slightly over the last two weeks, sentiment has improved significantly across most areas of the market since surveying began in April. Over the last couple of weeks, the Pre-COVID Index (market activity compared to pre-COVID levels) has improved from -25 to -19 (up from -49 in late April). Sentiment in the U.K. is more positive than in North America, but the recent improvement in market activity in Canada has continued to be evident.

Other highlights from the survey conducted July 20-22:

• The Recent Market Activity Trend (RMAT) Index, reflecting the trend over the previous two weeks, has risen strongly in areas that are not directly transaction-related; the RMAT Index for Advisory Services has risen from -1 a month ago to +24 in the latest survey.
• All the main areas of advisory services have seen a sustained recovery in levels of market activity over the last six weeks, as businesses begin to step up their levels of activity.
• The property/facilities management and valuation segments have seen rising levels of activity for the last two months, with the corporate/occupier consulting and planning & development markets seeing a marked uptick in momentum over the last few weeks. (See chart below).
• On the transactional side, industrial market sentiment continues to improve, while activity in the retail sector increased significantly over the last two weeks; the RMAT Index for retail has increased from -44 in late April to +23 this week, as retail operators take action to review their portfolios and operating models as consumer activity resumes.
• The healthy recovery in new business discussions evident since mid-June continued, albeit at a more moderate pace over the last two weeks. The uptick remains strongest in the advisory segments but is equally positive in capital markets and retail brokerage segments where businesses are moving to adapt and respond to the current business environment.

“Business and economic recovery from COVID-19 will not be a linear process,” said Dr. Nick Axford, Global Head of Research at Avison Young. “The positive momentum in real estate markets is still evident in our latest survey, albeit that the rate of improvement has moderated, and office leasing markets are lagging somewhat behind other sectors. Still, the strong recovery we’re seeing in many advisory service areas of the market suggests that businesses are working hard to adapt to the current environment. Whether this involves managing short term occupational requirements or starting to plan further ahead, the slow but steady upturn in activity in the real estate sector is a welcome indicator of potential wider improvement in the economy.”

About Avison Young’s Commercial Real Estate Market Activity Indices

Avison Young’s Commercial Real Estate Market Activity Survey is conducted bi-weekly among more than 630 Principals across North America and Europe. Indices compiled by the firm are designed to reflect absolute levels of activity as well as the short-term trend, including

• Market activity relative to pre-COVID levels
• Market activity compared with two weeks prior
• Client new business requests compared with two weeks prior

Each Index is scaled from -100 to +100, with zero representing a neutral “no change” score.

The next Commercial Real Estate Market Activity Indices will be available on August 11, 2020.