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Global Real Estate Investment of $382bn in H1 2007 Surpasses Full Year 2003 Figure |
Provisional figures from Jones Lang LaSalle show that global direct
real estate investment totalled a record US$382bn in the first half of
2007, a 16.6% rise on volumes in the same period last year – and
surpassing full-year investment in 2003. Global Real Estate investment
grew for the 16th consecutive quarter - with the Americas, Europe and
Asia Pacific once again achieving record investment volumes.
In the Americas, total investment surged 32% to $170.7bn, primarily
driven by the trading (and re-trading) of prime US properties acquired
as a part of Private Equity led REIT privatizations and subsequent
portfolio break-ups. The majority of prime assets were sold to domestic
investors – a notable change from 2006, however overall, cross-border
investment increased again in the region. Latin America had a very
strong half as the market became increasingly sought after by Global,
North American and European investors.
European investment volumes rose 4% to $156.6bn, with the UK, Germany
and France accounting for over two thirds of volumes. Quality assets
were particularly sought after. The UK market experienced a strong
quarter for trophy assets, with six single assets valued at over US$1bn
trading – up from one in full-year 2006. Prime trophy assets also
attracted very competitive bidding in Germany and France. Global, US,
Irish and Spanish investors were dominant cross-border investors.
German funds made a strong return to the European investment markets,
many having significant liquidity after heavy selling activity in 2006.
Investment in Asia Pacific rose 12% to $55bn, with a significant
proportion of the increase representing additional cross-border
investment. Japan, China and Singapore represented the strongest real
estate markets in the region. Singapore became 2007’s hottest global
market, with prime capital values increasing by 50% in H1 fuelled by
astounding rental growth and yield compression.
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Tony Horrell, CEO of Jones Lang LaSalle’s European Capital Markets
Group commented: “For the remainder of 2007, Jones Lang LaSalle expects
global real estate markets to remain strong, however we expect
investors to become increasingly selective about markets. Globally we
continue to see a weight of money targeting the sector – evidenced by
the record real estate funds raised by Private Equity in recent months.
Cross border investment remains strong – driven by Global, Middle East,
North American, Irish, German and Australian funds.”
Padraig Brown, Head of Global Strategy and Research, Jones Lang LaSalle
International Capital Group added: “The increased cost of debt in
Europe and North America has led to negative yield spreads in many
markets, forcing highly leveraged investors to adopt increasingly
opportunistic strategies including development and repositioning of
assets. Equity investors, with less reliance on debt, now occupy a
strong position in competitive bidding against highly leveraged
investors.”
In the Americas, we are seeing a ‘flight to yield’ with investors
seeking relative value in secondary and tertiary markets less affected
by recent yield compression. Many of the privatised REITs have now been
broken-up and resold, and we expect transaction in H2 to return to more
historical levels.
Europe is experiencing a ‘flight to quality’ in many markets, with the
pricing for some secondary assets now considered too close to that of
prime assets. Many investors increasingly favour the European mainland
over the UK as interest rates approach 6% in the latter market.
Emerging Europe remains popular with opportunistic investors.
As strong Asian economic growth continues and interest rates in the
region remain low, Asia is increasingly becoming the destination of
choice for opportunistic international capital and we expect this trend
to continue for the remainder of 2007. |
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