Global commercial realty investment to rise 40%

Global direct commercial real estate investment volumes for 2010 will reach $280-290 billion, a 35 to 40 per cent  increase on 2009, Jones Lang LaSalle (JLL) said on Monday.

Investment volume totalled $69bn in the third quarter of 2010, which is similar to the second quarter of 2010 and  indicates that the recovery in investment activity seen in the previous four quarters has levelled off, according  to the global real estate consultancy.

Direct commercial real estate investment volumes in the first three quarters of this year have reached $202bn  compared to the $139bn transacted over the same period of 2009.

Fadi Moussalli, Regional Director of the International Capital Group (ICG), Mena at Jones Lang LaSalle commented:  “A significant weight of equity capital is targeting prime assets across all sectors, but a scarcity of prime  product for sale is constraining investment volumes.  Product shortages are also resulting in yield compression and  substantial rises in prime capital values across many of the world’s leading office markets, from London to  Washington DC to Shanghai.”

He added: “For the full year, we now expect global direct real estate volumes to reach $280-290bn, marginally below  our original projection of $300bn, but nonetheless representing a 35 to 40 per cent increase on 2009. Further  growth in volumes is anticipated in 2011, with cash-rich investors widening their geographic search, pushing into  value-added opportunities and eventually into secondary stock.”

Asia Pacific has seen a 12 per cent quarter-on-quarter increase in investment volumes in the third quarter to  $18bn, with notable quarterly rises in Singapore, Australia, China and Malaysia.

Stuart Crow, head of Capital Markets in Asia Pacific said: “The Asia Pacific investment market is benefiting from  optimistic business sentiment, resurging investor confidence and strong economic fundamentals. We anticipate  transaction volumes to show 15 to 25 per cent growth on 2009, reaching the $77bn mark by year end.”

Alistair Meadows, head of the International Capital Group (ICG), Asia Pacific said: “In addition to net positive  in-flows to Asia Pacific there continues to be strong investor demand from Asia to selective European and US  markets, with Asian investors exporting $1.1bn into the European market, particularly London in the first half  2010. Given the currency play favouring Asian investors into these markets, we see this export of capital  continuing into 2011.”

In Europe, Middle East and Africa (Emea), despite the third quarter witnessing a 12 per cent decline in volumes on  the second quarter to $27bn, full year volumes are expected to be 30 per cent higher than in 2009.

A lull during the summer months, a lack of core product and ongoing concerns around sovereign debt in some  countries have restrained transaction volumes in the past quarter.  In Spain and Italy, volumes are down  significantly from second quarter, while in the UK and Germany, the pace of activity has slowed. 

This is counterbalanced by an increase in investment volumes quarter on quarter in France and, more notably, in  Sweden.

Richard Bloxam, head of the firm’s pan EMEA Capital Markets team commented: “Compared with 2009, investor sentiment  remains positive across the region.  For the full year we expect EMEA investment volumes to be 30 percent higher  than in 2009.  Looking forward, both Germany and the Nordics are likely to see higher volumes, where improving  fundamentals and resilient economies are boosting investor confidence.”

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