An indicator of commercial real estate transaction volume just improved for the first time this year

Commercial real estate activity is showing signs of recovery, with JLL's global Bid Intensity Index improving in July for the first time since December, indicating stabilizing "bidder dynamics" and increasing capital. This signals a renewed appetite among institutional investors, as borrowing costs and asset values stabilize and bid-ask spreads narrow, particularly in the "living" and office sectors. While industrial remains a laggard, the report anticipates a gradual recovery and momentum picking up through H2, driven by investors' increasing comfort with uncertainty and a move to "risk-on" supported by strong debt markets.

Analysis

Commercial real estate activity is showing nascent signs of recovery following a slowdown earlier in the year, according to JLL's global Bid Intensity Index, which posted its first improvement in July since last December. This stabilization in "bidder dynamics" suggests a resurgence in liquidity and competitiveness within private real estate capital markets, underpinned by firm asset valuations and stabilizing borrowing costs. The recovery is sector-specific; the "living" category, including multifamily and student housing, is demonstrating the most significant improvement with narrowing bid-ask spreads. The office sector is also showing signs of life, driven by an increase in bidders and financing availability, leading some to call a market bottom as investors seek bargains. In contrast, the recovery is uneven, with the industrial sector lagging due to supply chain uncertainty and tariffs, while retail has declined in recent months despite year-over-year gains. The overarching investor sentiment appears to be shifting towards accepting uncertainty, moving into a "risk-on" mode supported by strong debt markets, which JLL anticipates will fuel continued growth in capital flows through the second half of the year.

Key Decisions for Investors

• Investors should consider increasing exposure to the 'living' and office real estate sectors, which are demonstrating the strongest recovery signals with narrowing bid-ask spreads and rising deal demand.
• Exercise caution in the industrial and retail sectors, as they face significant headwinds from tariffs and supply chain disruptions that could continue to dampen performance.
• Given the stabilizing financing environment and the shift to a 'risk-on' posture, deploying capital in the second half of the year could prove timely, particularly for targeting undervalued assets in the office market where fundamentals are improving.