Global direct real estate investment volumes in the second quarter of 2011 totaled more than US$101 billion, up seven percent from the previous three months and 47 percent from the second quarter 2010, according to preliminary research findings from Jones Lang LaSalle’s global capital markets experts.
Arthur de Haast, Head of the International Capital Group at Jones Lang LaSalle said: “The upswing in activity continues, with exceptional gains in North America, which was late to the recovery, driving that region to the top spot in terms of volumes. Looking ahead, debt concerns in some advanced economies and the risk of overheating in some emerging markets will induce caution and careful asset selection, adding to a natural deceleration in the recovery. Nevertheless, the pipeline of product in the market gives us confidence that full-year volumes will reach our forecast of US$440 billion.”
Regional highlights
The Americas experienced the most property trading activity since late 2007, moving to the top spot as activity catches up to the early movers in other regions. All property sectors in the United States experienced strong growth given the increased debt availability and a hunger among investors for yield options in the very low interest rate environment. Volumes for the region rose 56 percent from the first quarter of 2011 to US$49 billion. Canada also saw a sharp bounce, with activity more than tripling from first quarter 2011. South of the border, Brazil slowed from the heated pace of the prior two quarters as several very large portfolio sales were digested. The volume of investment flows in the Americas should remain strong throughout the year, though at a slower pace of growth than previously witnessed.
Meanwhile, in Europe, the Middle East and Asia (EMEA), investment volumes broadly stood still in the second quarter at US$34 billion, while registering moderate growth compared to the same period of 2010. A strong upswing in the Nordics and in Russia was offset by a modest cooling off in the UK and a bigger slowdown amidst the troubled southern periphery, with the notable exception of Italy, which experienced a slightly smaller dip. In the Middle East, activity remains muted – at present, the region is more notable as a source of capital.
Finally, in Asia Pacific there was a sizable fall (30 percent) in volumes compared to the previous quarter, but still a decent gain year-on-year to US$18.5 billion. The natural disasters in Japan, the region’s largest property investment market, aggravated a normal seasonal slowdown. It is not surprising that healthy markets elsewhere in the region, including strong growth in Australia and steady levels of activity in China and Hong Kong, failed to make up the shortfall.
Global forecast
Looking ahead to the remainder of the year, Jones Lang LaSalle’s Global Capital Markets Research Director Paul Guest said, “Our forecast calls for a further US$240 billion to transact in the second half. There are several supportive factors to note: Japan will rebound from March’s natural disasters; there is additional bank product coming up for sale in Europe and the United States, some of it very good quality; and the large emerging markets appear to be absorbing the impact of regulatory measures without a ‘hard landing’. Nonetheless, the rate of growth has started to decelerate and this will continue, particularly as central banks continue to tighten around the world.”
