Investment in global commercial real estate market sees strong growth

INVESTMENT in global commercial real estate markets continues to rally, with strong growth in first half of 2013, according to the latest report from Jones Lang LaSalle.

Preliminary numbers covering 60 countries and over 130 cities show direct investment volumes reached US$114 billion in the second quarter of 2013 up 4 per cent on the second quarter of 2012 and up 9 per cent on the first three   Continued strong growth in the second quarter of 2013 has kept global volumes above US$100 billion for five consecutive quarters, evidencing increasing investor confidence in commercial real estate, despite volatility in equity and bond markets.

The report also shows that the Americas saw a 39 per cent rise in transaction volumes in the second quarter compared to the first quarter of 2013, reaching US$52 billion and up 11per cent year on year.

In the first half of the year it totalled US$90 billion, equating to a 9 per cent increase over the same time last year. Quarterly volumes in Mexico and Canada rose significantly to keep pace with the continued acceleration in the US market, which grew by 19per cent year on year in the second quarter of 2013.

Asia Pacific and EMEA both recorded strong growth over the half-year with 11 per cent and 12 per cent year on year increases in volumes respectively. Quarterly volumes in Asia Pacific remained flat both quarter on quarter and year on year, quarterly volumes in EMEA were flat year on year but down 13 per cent quarter on quarter following a buoyant start to 2013.

The largest markets globally continued to see growth over the first half of the year with Japan up 50per cent, Australia up 10per cent the UK up 4per cent, Germany up 43per cent and France up 6per cent, all recording half year increases compared to the first half of 2012. Only China with a fall of 20per cent saw transaction volumes fall in the first half, however a stronger performance is expected in the second half of the year as deals already in progress complete. 
Jones Lang LaSalle’s forecasts for the remainder of 2013 remain at between US$450 to US$500 billion. With global volumes up 11per cent on this time last year and the second half of the year traditionally busier than the first, the global investment market is on track to surpass last year’s volumes. 
“Over the past two to three years, we have predicted that more capital would be allocated to direct investment in core property assets and this is now materialising,” said Arthur de Haast, lead director, International Capital Group at Jones Lang LaSalle. 
“Institutional, private equity and high net worth individual investors are now consistently bidding on opportunities around the world. In addition to this, investors are starting to diversify their portfolios, both in terms of risk and geography, looking for more value added and secondary opportunities; a trend we expect to continue over the short to medium term,” he added.

David Green-Morgan, global capital markets research director at Jones Lang LaSalle said that the volatility seen in equity and bond markets over the last quarter has further added to the attraction of commercial property as an asset class.

“So far, the rising cost of global real estate debt has had little effect on transaction volumes with most deals funded on modest loan to value ratios. Unless there is a substantial rise in the cost of debt, it is only likely to have a marginal impact on transactional volumes for the remainder of 2013,’” he added.

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