Despite Global Sovereign Debt and Economic Concerns in 3Q, Real Estate Capital Flows Up 36% Over 2010

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According to figures released this week by Jones Lang LaSalle, global direct real estate investment volumes in the third quarter of 2011 totaled $US99 billion, up 36 percent on the same period in 2010.

In the first nine months of 2011, investment activity increased by 43 percent, with total transaction volumes amounting to $US297 billion, compared to $US208 billion in the same period last year.

Global Forecast

Arthur de Haast, Head of the International Capital Group at Jones Lang LaSalle tells the World Property Channel, "Real estate fundamentals remain relatively strong and the asset class has gained favor compared to equities and bonds. However, debt finance is harder to come by than earlier in the year, and the expected growth in interest in secondary product has stalled as investors take refuge in core, well-let product in specific markets. The market remains very much sentiment-driven and the mood is cautious, resulting in delays in closing deals and volatility in transaction volumes quarter-on-quarter.

In the context of the sovereign debt crisis and wider economic growth concerns, we feel that there is a possible downside of up to 10 percent against our original estimated volumes for 2011of $US440 billion."

Regional Spotlight

Despite heightened economic and sovereign debt concerns, European transaction volumes have held up well, with a total of $US41 billion in the third quarter, an increase of 14 percent on the last quarter and a 38 percent rise on the third quarter 2010. The UK, the largest market in Europe, saw a marked improvement in the third quarter 2011, in part due to deal completions delayed from Q2. Germany, France, Scandinavia, Poland and Russia all continue to attract strong investor interest, with "safe haven" status and relative GDP growth considerations prevalent.

In Asia Pacific, transaction volumes amounted to $US20 billion in the third quarter. This represents an eight percent rise on the previous quarter, and a three percent increase on the third quarter 2010. The deal volume for China's direct commercial property investments rose to approximately $US2.8 billion, up 13 percent on last year. Japan, the largest Asian market, saw volumes rise to over $US4.7 billion, in line with the same quarter in 2010, as the markets recovered following the tsunami and earthquake earlier in the year. 

The Americas saw a slowdown in the third quarter with volumes down 22 percent compared with what was a very strong second quarter. Investment reached $US38 billion, up 60 percent on the same period last year. 

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