Global Transaction Volumes Hold Up Well in the Third Quarter Despite Sovereign Debt and Economic Growth Concerns

Global direct real estate investment volumes in the third quarter of 2011 totalled $99 billion, up 36 percent on the same period in 2010, according to figures released today by Jones Lang LaSalle. In the first nine months of 2011, investment activity increased by 43 percent, with total transaction volumes amounting to $297 billion, compared to $208 billion in the same period last year.

Regional Spotlight

Despite heightened economic and sovereign debt concerns, European transaction volumes have held up well, with a total of $41 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 $20 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 $2.8 billion, up 13 percent  on last year. Japan, the largest Asian market, saw volumes rise to over $4.7 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 $38 billion, up 60 percent on the same period last year.

Global Forecast

Arthur de Haast, Head of the International Capital Group at Jones Lang LaSalle said: “Real estate fundamentals remain relatively strong and the asset class has gained favour 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 2011 of $440 billion.” Benjamin Perez-Ellischewitz, Head of Capital Markets at Jones Lang LaSalle Budapest added: “Close to € 200 million were invested in Hungarian assets in Q3 2011. The main transactions included: the acquisition of the Hungarian Television’s new headquarter, the  first closing in the sale process of Raiffeisen Real Estate Fund  and the acquisition of an OBI store, just to mention a few.  So far the total volume of transactions in 2011 in Hungary amounts to some € 470 million. Based on the current pipeline of assets under exclusivity we now expect the total volume for the year to reach some € 875 million.”