New research from Jones Lang LaSalle reveals that preliminary global direct commercial real estate investment volumes totalled US $69 billion (approx. €49 bln.) in the third quarter of 2010.
This level 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. Direct commercial real estate investment volumes in the first three quarters of this year have reached US $202 billion compared to the US $139 billion transacted over the same period of 2009. Jones Lang LaSalle expects volumes for the full year to reach US $280 to 290 billion.
Arthur de Haast, Head of the International Capital Group (ICG) 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 US $280 to 290 billion, marginally below our original projection of US $300 billion, but nonetheless representing a 35 to 40% 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% quarter-on-quarter increase in investment volumes in the third quarter to US $18 billion, with notable quarterly rises in Singapore, Australia, China and Malaysia. Stuart Crow, Head of Capital Markets in Asia Pacific commented: "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% growth on 2009, reaching the US $77 billion 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 US $1.1 billion into the European market, particularly London in H1 2010. Given the currency play favouring Asian investors into these markets, we see this export of capital continuing into 2011."
He added: "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. For example Asian investors exported US $1.1 billion into the European (especially London) in H1 2010. Given the currency play favouring Asian investors into European and US markets we see this export of capital continuing into 2011."
In Europe, Middle East and Africa (EMEA), despite the third quarter witnessing a 12% decline in volumes on Q2 to 21 billion (US $27 billion), full year volumes are expected to be 30% 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% 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."
Damian Corbett, Head of Offices Capital Markets England added "Although volumes in the UK, Europe's largest market, appear to have levelled off, dem