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London, Chicago, Singapore

Jones Lang LaSalle:  USA, Canada Show Solid Transaction Growth; Overall Cross Border Capital Flows Decline in Q1

Europe continues to see inflows while global capital departs Asia Pacific

London, Chicago, Singapore, May 3, 2012 – While the United States and Canada both boasted solid gains in the number of transactions in the commercial property market in the first quarter of 2012, overall global direct commercial real estate investment declined 21 percent year on year to $77 billion compared to the $97 billion recorded in Q1 2011, according to Jones Lang LaSalle’s Q1 Global Capital Flows report.   Cross border capital flows in the quarter dipped to be just 39 percent of overall transactional volumes, the lowest since Q3 2010.

USA most active real estate investment market
The U.S. remains the most active source of capital globally thanks to a 25 percent increase year on year, although the majority of transactions are confined to the domestic market with only 7 percent of USA purchases being cross-border.
Solid volumes in the Americas as EMEA and Asia Pacific fall
The Americas overall saw a solid $29 billion of transactions over the quarter. Although down 6 percent on Q1 2011 due to the stellar activity in Brazil last year not repeating this time around, the U.S. commercial property market was up 15 percent and Canada 52 percent.

The $28 billion total recorded in Q1 2011 in Europe, Middle East & Africa represented a fall of 27 percent compared to a year ago. The largest recorded year on year fall was seen in the Asia Pacific region with $20 billion of transactions, down 28 percent, despite rises in transactional activity in both Japan and Hong Kong.

Arthur de Haast, Lead Director International Capital Group, Jones Lang LaSalle said, “Despite the fairly quiet start to 2012, we remain upbeat and maintain our full year forecasts at $400 billion. Although the recent economic indicators from the U.S. offer encouragement for global real estate, there remains much to do, as there does across the Eurozone. The year ahead will continue to be dominated by government reaction to on-going economic uncertainty, which global investors will watch with interest. We also expect continued bank deleveraging to attract more private equity funds as they target debt and distressed opportunities in the USA and Europe.”
Europe benefits from inflows, Asia Pacific sees outflows
The majority of inter-regional capital flows remains focused on Europe with 67 percent of relevant transactions targeting the larger more liquid markets. In Asia Pacific, $5.7 billion was pulled out of the region, while only $400 million was allocated to it, continuing the 2011 trend. Growing Asian pension funds are executing their global diversification strategies away from their home markets.

London dominates New York and Tokyo in Q1 2012
In Q1 2012, London also reclaimed its position as the most active global city from Paris, which had seen considerable investment activity in Q4 2011. This change was in part due to significant support from Middle Eastern investors in the London market and the end of a favorable tax arrangement in France.  Toronto and Oslo were new entrants into the top 10 traded cities in Q1 2012 due to major one off transactions.

Office sector liquid, industrial gains more interest
The office sector was the most liquid and gained 54 percent of all investment due to sustained interest in major global cities. The recent trend of retail taking an increasing share of overall transactional activity stalled for this quarter.

The industrial sector attracted significant activity including large portfolio deals in Japan and recorded 15 percent of all transactions, one of its busiest quarters on record. In contrast, this quarter is likely to be the low point for both retail and hotel volumes, $15 billion and $5 billion respectively, with a number of transactions globally having just closed or in the final stages of due diligence, which will impact positively on Q2 volumes.

David Green-Morgan, Global Capital Markets Research Director, Jones Lang LaSalle commented, “We expect investor interest in the industrial sector to continue throughout 2012 as yields in the office and retail sectors have compressed globally in the last two years. We also expect closer scrutiny of value-add opportunities including previously neglected secondary markets as pricing in prime markets remains firm. However, transactions will take longer as many investors undertake additional due diligence.”

Notes to the Editor
Figure 1: Direct commercial real estate volumes, 2011 – Q1 2012

Source: Jones Lang LaSalle
Figure 2: Most active cities in Q1 2012
Source: Jones Lang LaSalle
Additional charts and tables on request

Jones Lang LaSalle’s Global Capital Flows analysis provides a set of data designed to help investors understand how commercial real estate capital is moving around the world. The findings are released quarterly.  All of the current Global Capital Flows data can be found at our interactive website which also acts as a portal for media and clients to access Jones Lang LaSalle’s global capital markets research. Bookmark this site for the most up to date global real estate data and commentary: -
  1. Intra-regional: Both purchaser and vendor originate from the region where the asset is located.  For instance, a US REIT purchasing in Canada, or a German Open Ended Fund selling in the UK. 
  2. Inter-regional: Purchaser, vendor or both originate from outside the region where the asset is located. For instance, a US REIT purchasing in Denmark, or an Australian Pension Fund selling in Canada.
  3. Cross-border: Refers to any purchaser, vendor or both that originates from outside the country in which the relevant transaction occurs. Categorized into Inter-regional and Intra-regional transactions.
  4. Domestic: Refers to any investor that originates from within the country in which the relevant transaction occurs. Transactions involving both “domestic” purchaser and seller are referred to as “domestic” activity.
  5. Entity-level transactions, development projects and multi-family residential investment are excluded from our provisional data and may change.
  6. Jones Lang LaSalle converts transaction values into USD at the average daily rate for the quarter in which the transaction occurred. In other words, the foreign exchange effect has not been removed.
  7. Global Funds are funds which raise capital in multiple regions.

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About Jones Lang LaSalle
Jones Lang LaSalle (NYSE: JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47.2 billion of assets under management. For further information, please visit