Global direct commercial real estate investment volumes to increase in 2010

PETALING JAYA: Global direct commercial real estate investment volumes are anticipated to increase between 30% and 40% this year, said financial and professional services firm, Jones Lang LaSalle (JLL).

“The Americas, coming from a low base, may be poised to see the largest growth at a projected 50% to 60%. The expected volume of growth in Asia-Pacific is 30% to 50% while in Europe, the largest regional market in 2009, 20% to 30%,” said JLL’s head of International Capital Group, Arthur De Haast in a statement recently.

Global commercial property transaction volumes in the 2H2009 showed clear signs of a recovery as all the three major regions showed an improvement on 1H2009 volumes, reversing a trend of declining volumes, according to JLL’s proprietary Global Capital Flows data analysis.

However on a full-year basis, 2009 global transaction volumes fell to US$209 billion (RM678.83 billion), 45% down on 2008.

“The increase in global transaction volumes that occurred in 2H2009 in all regions is an encouraging sign, although full-year volumes were below 2003 levels, so, there is still a long road ahead,” De Haast said.

In Europe, total transaction volumes in 2009 finished the year at US$98 billion, representing a 41% decline from 2008 levels, and a 71% decline from the market peak.

Asia-Pacific, where there is less exposure to the debt crisis experienced the smallest decline in total volumes in 2009, down 23%, to US$66 billion, representing a 46% decline from the market peak.

The Americas faced harsh market realities with 2009 volumes down 64% to US$45 billion. For the first time, the Americas fell behind Asia-Pacific in global transaction volumes, accounting for just 22% of total global volumes.

In 2009, US and Japanese investors remained the top two purchasers of direct commercial real estate but 90% of that was focused on their domestic markets. Meanwhile, German investors overtook UK investors as the third-largest purchasers of real estate globally. In contrast to the US and Japanese investors, almost half their purchases were cross-border.

“The continued drop in the Americas’ volumes is a result of the lack of liquidity in the market and the spread between buyers and sellers’ expectations. Today, the gap between both sides of the transaction is narrowing and the debt markets are easing to a level where new trades will pick up through 2010,” said managing director of the Americas International Capital Group, Steve Collins.

The largest cross border purchasers of real estate were the global funds, with German investors in second place.

South Korean investors became significant purchasers of cross-border real estate with their primary focus being in the UK. Asia-Pacific investors, as a group, significantly stepped up their cross-border acquisitions in 2H2009, targeting the UK, China and Australia.

While the US remained the largest market in terms of total volume in 2009, the UK overtook the US as the largest cross-border market in 2009.

Apart from the speed of price correction, the UK benefited from the relative weakness of the pound. Investors also like the long leases and strong covenants that are available, as well as the fact that it is a large, transparent market.

In the UK, 54% of transactions (in terms of volumes) were made by cross-border purchasers compared with 34% in France, 16% in the US, 12% in Germany and 11% in Japan.