Investment In Commercial Real Estate Surges
Tuesday, April 19, 2011

Preliminary figures released by Jones Lang LaSalle’s Capital Markets Research reveals that global direct commercial real estate investment volumes totalled just under USD90bn in the first quarter of 2011.

While this figure is down 20% from the previous quarter it represents growth of nearly 38% from Q1 2010, indicating the continued appeal of commercial property to a broad range of investors, Jones Lang LaSalle said.

“We continue to see strong interest for core product in gateway cities from institutional and private investors," observed Arthur de Haast, Head of the International Capital Group at Jones Lang LaSalle. "However, investors are only moving into riskier markets and products on a selective basis, with many waiting to see more bank-released product or stronger fundamentals first.”

According to the research, in Asia-Pacific, volumes rose both compared to the previous quarter and to the same period in 2010. “This continued growth is testament to the strong fundamentals of the region. Japan was the most active real estate market, with a confident start to the year, albeit prior to the recent earthquake tragedy. Domestic investors dominated activity in the region’s other major core markets”, noted Stuart Crow, Head of Asia-Pacific Capital Markets at Jones Lang LaSalle.

In Europe and the Middle East, activity slowed compared to the last three months of 2010, but was up nearly a quarter year-on-year. Richard Bloxam, director of Jones Lang LaSalle’s EMEA Capital Markets commented: “The seasonal slowdown after the end of year rush was expected, particularly after a closing quarter with a number of large, high profile transactions. However, compared to the start of 2010 all major markets have seen an increase in volumes, particularly Germany, Poland, Russia and the UK”.

In the Americas, the volume of activity also dropped off modestly compared the previous quarter but more than doubled from Q1 2010, the study found. Commenting on these results, Steve Collins, Managing Director, Americas at Jones Lang LaSalle, said that: “We saw a big jump in volumes at the tail end of last year, driven by the US, and we expect a strong year in 2011. The small drop off in Q1 is the result of investors adopting a ‘wait and see’ approach, due to concern they might be chasing yield downward”.

Looking at the global volumes, Paul Guest, Jones Lang LaSalle’s Global Capital Markets Research Director, said that: “There are sound reasons for investors to be looking at commercial property: its perceived inflation hedge; supply shortages in many gateway markets; appealing risk-adjusted returns when compared to more volatile assets; still-attractive pricing outside some of the prime markets which corrected earliest; and even a pick-up in both debt issuance and securitization. We expect a further USD290-310bn in direct commercial real estate transaction volumes in the remainder of this year.”