International Commercial Real Estate Markets Are Rebounding

On a global level, commercial real estate is staging a comeback, posting promising transaction levels to close 2009. The Asia Pacific market overtook the Americas in total volume, …

On a global level, commercial real estate is staging a comeback, posting promising transaction levels to close 2009. The Asia Pacific market overtook the Americas in total volume, while investors from that region also made significant cross border buys. See the following article from Property Wire for more on this.

Worldwide commercial property transaction volumes began recovering in the second half of 2009 reversing a downward trend, according to the latest analysis from consultants Jones Lang LaSalle.

Its Global Real Estate Capital Flows Update expects the improvement to continue although it will be uneven. Overall analysts anticipate a 30 to 40% increase in direct commercial real estate investment volumes. The Americas, coming from a low base, may be poised to see the largest growth at 50 to 60% while growth in Asia Pacific is projected as 30 to 50%. Europe is expected to only see growth of 20 to 30%.

The report also points out that on a full year basis, 2009 global transaction volumes fell to $US 209 billion, down 45% on 2008. The rate of global volume decline slowed as the drop in 2009 was less pronounced than in 2008 when volumes were down 50% compared with the previous year. At the peak in 2007, global transaction volumes amounted to $US 759 billion.

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‘The increase in global transaction volumes that occurred in the second half of 2009 in all regions is an encouraging sign, although full year volumes were below 2003 levels so there is still a long road ahead,’ said Arthur de Haast, head of the firm’s International Capital Group.

In Europe, total transaction volumes in 2009 finished the year at $US 98billion, a 41% decline from 2008 and a 71% decline from the market peak. Asia Pacific, where there was less exposure to the debt crisis, there was a 23% decline in total volumes in 2009, down to $US 66 billion, and a 46% decline from the market peak.

The Americas faced harsh market realities with 2009 volumes down 64% to $US 45 billion, an 85% from the market peak in 2007. For the first time, the Americas fell behind Asia Pacific in global transaction volumes, accounting for just 22% of total global volumes.

‘The continued drop in the Americas volumes is a result of the lack of liquidity in the market and the spread between buyers and sellers’ expectations. Today, the gap between both sides of the transaction is narrowing and the debt markets are easing to a level where new trades will pick up through 2010,’ explained Steve Collins, managing director of the Americas International Capital Group.

‘We’ve already toured 20 Japanese and German groups through the coastal US markets looking for prime investment opportunities in 2010,’ he added.

In 2009 domestic investment was more dominant than cross border trades as investors were risk averse and debt restricted. The largest cross border purchasers of real estate were the global funds, with German investors in second place. Also South Korean investors became significant purchasers of cross border real estate their primary focus being the UK.

Indeed Asia Pacific investors as a group significantly stepped up their cross border acquisitions in the second half of 2009 targeting the UK, China and Australia. While the US remained the largest market in terms of total volumes in 2009, the UK overtook the US as the largest cross border market in 2009. Apart from the speed of price correction, the UK benefited from the relative weakness of sterling. Investors also like the long leases and strong covenants that are available, as well as the fact that it is a large, transparent market.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

 

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