JLL forecasts direct investment in commercial real estate in Europe to increase by up to 30% in 2011 (EU)

Jones Lang LaSalle expects direct investment in commercial real estate in Europe in 2011 to rise by up to 30% on 2010 figures, when the market transacted €102 billion. According to Jones Lang LaSalle's European Capital Markets Bulletin, which is due to be published shortly, liquidity has returned to the market driven by cross-border investment from equity-rich private and institutional investors, which resulted in increases in investment volumes of 48% year-on-year. A lack of prime product and improving rental prospects will encourage investors to broaden their horizons and consider higher risk and return profiles this year.


In Belgium in particular, Jones Lang LaSalle expects to see an increasing investment volume in 2011.

Olivier Bastin, Director at Jones Lang LaSalle BELUX, said: "The UK, France and Germany captured the greatest proportion of investment capital in 2010 and are still perceived as attractive havens for investors."

Olivier continued: "A shortage of available core product in major Western markets means we anticipate the investment momentum of 2010 in Central Europe and Nordics to accelerate in 2011. Europe's two largest emerging markets Russia and Turkey will also witness increased investment transaction activity this year. Although investors will compete on price for assets in these countries, they won't compromise on quality; core product in major cities is still the focus. In Western markets we will witness increasing appetite from investors to secure core assets via forward commitments to purchase and in some instances funding positions. Investors continue to take a highly selective approach towards secondary assets.

In Belgium in particular, we also expect an increasing investment volume in 2011 as more products will be available. We see more interest from investors for 'core +' products. Developers will remain active looking for products with one to four-year cash flow and clear development potential. An important factor is that banks are once more willing to provide loans also for bigger tickets, although they are much more selective in terms of loan to value and borrower track record that they were in the years leading up to the crisis. German closed ended funds have clearly found their way to Belgium and we expect this trend to be continued for 2011. Local insurance companies will remain active as they will also increase capital allocation into real estate. Belgian SICAFI's (REITS) are expected to grow further.

Jones Lang LaSalle forecasts increasing capital values across the region. Unlike 2010, this will be primarily driven by rising rents, although there will be limited yield compression in CEE markets. Consequently, understanding tenants and the drivers within the occupational market, will be key in order to capture capital growth.

Patricia Lannoije, Head of Research BELUX at Jones Lang LaSalle, added: "Although vacancy remains high across Europe, tenant activity is increasing and the limited new supply being added to the market means that the absorption of this stock will place an upward pressure on rents. We will cont

Related News