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Cross border global real estate investment surged in 2010, report shows PDF Print E-mail
News - Property
Thursday, 03 March 2011 09:39

Global cross border investment increased by 60% year on year and accounted for 40% (US$130 billion) of all direct commercial real estate investments in 2010, equal to the boom years of 2006/07, according to new research.

Inter regional investment volumes in the Americas doubled between 2009 and 2010 from US$14 billion in 2009 to US$31 billion in 2010. This strong bounce back was not only driven by the domestic market, but was led by US inter regional activity, as foreign investors and purchasers took advantage of a pick up in activity in the core markets to trade, the report from Jones Lang LaSalle’s global capital markets experts shows.

‘During the downturn, domestic trading held up better globally than cross border activity as investors focused their attention on familiar markets. In 2010 however, equity rich investors led the flight to quality assets in core, mature and transparent markets which has supported the resurgence in cross-border investment volumes over riskier secondary and tertiary domestic markets. We expect domestic and cross-border transaction growth to continue in 2011 as investors move up the risk curve,’ said Arthur de Haast, head of the firm’s International Capital Group.

‘Foreign investment re-entered the market aggressively in the back-half of 2010, and it began targeting just the top two trophy markets, New York and Washington, D.C. Now, those gateway cities are almost tapped out and some foreign investors are paying as much as $700 per square foot for prime real estate properties,’ said Steve Collins, managing director, Americas of Jones Lang LaSalle’s International Capital Group.

‘Today, the demand is increasing, but there isn’t enough quality product to buy in the top two core U.S. markets, so interest will extend to five markets in the next six months and into 8 to 10 markets throughout the country by the end of the year,’ he added.

In 2010, Europe and the Middle East boasted more cross border transactions, 53%, than domestic, 47%, with cross border volumes made up equally of inter and intra regional activity.

In 2010 cross-border volumes in Europe and the Middle East reached US$72 billion of a total market of US$136 billion, which was a 53% increase on 2009 when cross border accounted for US$47 billion of US$97 billion total European and Middle Eastern volumes.

‘With two of the most sought after global markets in the region, namely London and Paris, and a large number of active global investors, it is no surprise that this region led the world once again in terms of cross border activity of both buyers and sellers. We expect this trend to continue,’ explained Richard Bloxam, director of Jones Lang LaSalle’s EMEA Capital Markets group.

In Asia Pacific volumes were increasingly driven by cross border activity during 2010 and reached 32% (US$27 billion) of overall volumes last year compared to 26% in 2009 (US$17 billion) and 47% in 2007 (US$57 billion) which was peak of the market.

‘Investors renewed desire to look at international real estate opportunities as we emerge out of the global financial crisis is not surprising given the improved market fundamentals,’ said Alistair Meadows, director of Jones Lang LaSalle’s International Capital Group, Asia Pacific.

'However, the longer term trend toward cross border activity is a key part of Asia Pacific’s emergence as a major source of and destination for global real estate capital,’ he added.

Globally offices continue to make up the largest proportion of inter regional investment with transactions accounting 58% of the total. Inter regional hotel transaction volumes tripled year on year whilst the retail sector saw an increase of 31%. Jones Lang LaSalle expects these three sectors to remain the focus for inter regional investors in 2011.
  ‘New entrants featuring in the top 10 purchasers in 2010 included Malaysia, Saudi Arabia, India, and Canada. Canadian and Malaysian capital was dominated by institutional investors whereas the Saudi and Indian purchasers were mainly high net worth individuals or private investors. These new players replaced Australia, China, Spain and the UK who for various reasons including increased hedging costs, a refocus on domestic markets and sovereign debt issues, have been less active purchasers in 2010,’ said Paul Guest, head of Global Research Capital Markets Research.

The UK was the second largest market in terms of volumes traded, accounting for US$49 billion, following the United States which reached US$80 billion. The UK also recorded the greatest volume of cross border purchasers, at US$20 billion globally during 2010, and the highest proportion of inter regional purchasers at over 25%, driven mainly by a strong interest in core London assets.

 

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