Global Q2 Real Estate Investment Doubles

WORLDWIDE Global direct commercial real estate investment volumes reached US$66 billion in the second quarter of 2010, nearly doubling the levels seen at the market bottom a year ago. Real estate investment volume reached US$130 billion for the first half of the year, Jones Lang LaSalle reports.

“This is solid progress for commercial real estate investment markets, reflecting the pick-up in trading which we have witnessed in certain countries globally,” says Arthur de Haast, CEO of Jones Lang LaSalle Hotels. “That said, volumes are still well below pre-credit crisis levels, and since third-quarter 2009 incremental growth has been relatively modest.”

For the full year, Jones Lang LaSalle anticipates global real estate investment to reach US$300 billion, which represents a 40% to 50% increase year over year. That figure is still less than half the levels seen in 2006 and 2007, “but we must take into account the fact that those were heady years for commercial real estate investment, with unprecedented record trading volumes,” de Haast says.

Asia Pacific has seen a 34% quarter-on-quarter decline in investment volumes in to US$15 billion, with notable falls registered in Japan, China and Australia, while Hong Kong and Taiwan saw increases. Compared to the same quarter last year, volume was up by 21%.

“In Asia Pacific, the first half of 2010 has posted reasonably strong increases over the corresponding periods of 2009,” says Stuart Crow, head of the firm’s Asia Capital Markets Group. “If this trend continues, aggregate volumes could be around 30% higher this year to reach the mid-US$80 billion range.”

In Europe, Middle East and Africa, the second quarter has seen a modest 15% increase in volume to €23 billion, which is up 80% on a year ago. The UK accounts for more than 40% of EMEA volume, while London maintains its position as the world’s most active market, reaching US$5 billion in investment, though investors are increasingly focusing on France, Germany, the Nordics and Poland. Jones Lang LaSalle expects EMEA investment volume to be 35% higher in 2010 compared to 2009, reaching the €100 billion mark at year-end.

“We have seen a strong bounce-back in activity and pricing so far this year—especially for prime London,” says Julian Stocks, head of Capital Markets England at Jones Lang LaSalle. “However, in the last few weeks I have noticed a slight change in sentiment, and the balance between buyers and sellers has altered. I expect yield movement to be minimal for the next few months and turnover in England to be slightly ahead of 2009.”

The Americas have seen a sharp uplift in volumes in the second quarter, but the region started from a low base. Volumes have risen 54% to US$21 billion and are four times higher than last year. Quarterly growth in Canada and Brazil outstripped the United States.

“Globally, the strongest growth has been recorded in Brazil, where volumes have tripled on Q1 to US$1.6 billion, and are now at record levels,” says Steve Collins, head of the ICG in the Americas. “Canada has also seen strong improvement on the quarter, doubling to US$3.5 billion.”

In the meantime, investor demand continues to be strong for core assets in the United States, but the lack of product supply continues to hinder direct investment volumes. Collins expects a stronger sales environment in the United States as more product is already coming online and is expected continue to increase through the third and fourth quarters.

“We expect total transaction volume in the Americas region for the full-year 2010 to increase by at least 80% over 2009 and reach the US$80 billion to US$85 billion range,” Collins says.