GCC-led acquisitions in US down by 62%, says LaSalle report

Published Tuesday, April 08, 2008

By Parag Deulgaonkar

(GETTY IMAGES)

Real estate acquisitions by Gulf Co-operation Council (GCC) investors in the United States declined by 62 per cent to $2 billion (Dh7.3bn) in 2007, compared to $5.26bn in 2006, according to a new report.

Property purchases were down 35 per cent to $8bn from $12.3bn in 2006, Jones Lang LaSalle said in its Global Real Estate Capital report.

Although acquisitions fell by 25 per cent in the United Kingdom to $3bn, investment rose by 92 per cent in Germany and 99 per cent in France, reaching $1.2bn and $1bn, respectively.

Global direct real estate investment reached a record $759bn in 2007, up eight per cent from 2006. Sales activity rose by 58 per cent to $8bn, driven by sales in the US that amounted to $4.8bn.

A strategic move away from “trophy assets” was evident, with emerging markets such as Russia, Central and Eastern Europe, India, Indonesia and China increasingly popular. Offices continued to be GCC investors’ most preferred sector, followed by hotels, according to the real estate investment advisory company.

“There was a decline in direct real estate investment as investors moved into buying shares of property companies, or invested in unlisted real estate trusts,” Craig Plumb, Head of Research, Jones Lang LaSalle Mena, told Emirates Business.

“We expect higher investments this year, as investors are waiting for price adjustments to happen. We believe total real estate purchases by GCC investors will reach 20 billion in 2008,” he added.

Europe

Direct commercial real estate investment in Europe totalled $333bn in 2007, a 3.5 per cent rise on 2006.

The market continued to be dominated by the “big three” markets of the UK, Germany and France, which together accounted for 63 per cent of total volumes in 2007. Cross-border investors continued to dominate activity, accounting for 63 per cent of volumes in Europe.

At 70 per cent, Germany had the largest percentage of cross-border activity, ahead of the UK, where it represented just over 50 per cent of total activity. France, Sweden and Spain also saw a high proportion of investment.

Americas

Commercial real estate investment in the Americas totalled $304bn in 2007, up eight per cent on 2006. Transaction volumes in second half were 23 per cent down on first half due to a significant fall-off in transaction volumes in the US in the last quarter.

The US market, which accounted for 93 per cent of transaction volumes in the Americas, saw growth of just four per cent.

Asia Pacific

Despite the downturn in some major real estate markets in the second half of the year, and the effects of the weakening US dollar, capital flows continued to pour into the region.

Direct commercial real estate investment reached a record $121b in 2007, up 27 per cent on 2006, continuing to grow the region’s share of global volumes to 16per cent. Cross-border volumes in Asia Pacific surged to $57bn in 2007, accounting for 47 per cent of total transactions.

Meanwhile, GCC funds also stepped up their activity in the region with investment volumes increasing by over 130 per cent.However, investment volumes for 2008 will be down by 30 per cent, it said.

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