New research from Jones Lang LaSalle's global capital markets experts has found that preliminary global direct commercial real estate investment volumes reached US $66 billion in the second quarter of 2010. While this level is similar to the first quarter 2010, it nearly doubles the levels of the market bottom one year ago. For the first half of 2010 global direct commercial real estate investment volumes totalled US $130 billion. Americas rises 54%, EMEA up 15%, while Asia Pacific drops 34% quarter on quarter.
Arthur de Haast, Head of the International Capital Group (ICG) at Jones Lang LaSalle commented: "This is solid progress for commercial real estate investment markets, reflecting the pick up in trading which we have witnessed in certain countries globally. That said, volumes are still well below pre-credit crisis levels, and since third quarter 2009 incremental growth has been relatively modest."
He continued: "For the full year we anticipate volumes globally of around US $300 billion, which represents a healthy 40 to 50% increase on 2009. This is still less than half the pre-credit crisis levels of 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."
Jones Lang LaSalle's capital markets research found that significant regional differences have emerged in Q2 2010:
Asia Pacific has seen a 34% quarter-on-quarter decline in investment volumes in Q2 to US $15 billion, with notable falls registered in Japan, China and Australia, while Hong Kong and Taiwan saw an increase. Compared to the same quarter last year, volumes were up by 21% (from US $13 billion during the same period in 2009).
Stuart Crow, Head of the firm's Asia Capital Markets Group commented: "In Asia Pacific, the first half of 2010 has posted reasonably strong increases over the corresponding periods of 2009. If this trend continues, aggregate volumes could be around 30% higher this year to reach the mid US $80 billon range."
In Europe, Middle East and Africa (EMEA) the second quarter has seen a modest 15% increase in volumes on Q1 to 23 billion, which is up 80% on a year ago (in euro terms). In US dollar terms, volumes totaled US $29 billion, up 5% on the quarter and 70% over 2009. The UK accounts for over 40% of EMEA volumes, while London maintains its position as the world's most active market with volumes close to US $5 billion, though investors are increasingly focusing on France, Germany, the Nordics and Poland. In EMEA, Jones Lang LaSalle expect investment volumes will be 35% higher in 2010 compared to 2009, reaching the 100 billion (around US $130 billion) mark at year-end.
Julian Stocks, Head of Capital Markets England at Jones Lang LaSalle, said: "We have seen a strong bounce back in activity and pricing so far this year - especially for prime London. 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 Q2, but from a low base. Volumes have risen by 54% to US $ 21 billion on Q1 and are more than quadruple the $5 billion level of Q2 2009. Quarter over quarter growth in Canada and Brazil outstripped the United States.
Steve Collins, Head of the ICG in the Americas said: "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. Canada has also seen strong improvement on the quarter doubling to US $3.5 billion."
In the meantime, investor demand also 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.
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