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Chicago, London, Singapore

Cross Border Real Estate Investment Makes a Return to the Global Stage in 2010

Global Cross Border Volumes Reach US$130 Billion in 2010; Up 60 Percent Year on Year According to Jones Lang LaSalle


CHICAGO, LONDON, SINGAPORE, March 2, 2011 - Global cross border investment increased by 60 percent year on year and accounted for 40% (US$130 billion) of all direct commercial real estate investments in 2010 (US$318 billion), according to new research from Jones Lang LaSalle’s global capital markets experts.  This proportion is equal to the boom years of 2006-07.

Arthur de Haast, head of the firm’s International Capital Group, commented: “During the downturn, domestic trading held up better globally than cross-border activity as investors focused their attention on familiar markets.  In 2010 however, equity rich investors led the flight to quality assets in core, mature and transparent markets which has supported the resurgence in cross-border investment volumes over riskier secondary and tertiary domestic markets. We expect domestic and cross-border transaction growth to continue in 2011 as investors move up the risk curve.”

Inter-regional volumes reached US$ 82 billion in 2010, the same as in 2004, and constituted one fourth of overall global volumes. At their peak in 2007, inter-regional volumes were nearly triple 2010 volumes at $243b and made up over one third of overall global volumes.  The pick-up in inter-regional activity has proceeded in step with the overall market, suggesting that a significant number of investors are willing to look not only outside of their domestic markets, but outside of their region.

Inter-regional investment volumes in the Americas doubled between 2009 and 2010 from US$14 billion in 2009 to US$31 billion in 2010.  This strong bounce back was not only driven by the domestic market, but was led by US inter-regional activity, as foreign investors and purchasers took advantage of a pick-up in activity in the core markets to trade. Inter-regional purchasers transacted US$5.6 billion in 2009 and US$13.37 billion in 2010; inter-regional vendors acted on US$7.79 billion in 2009 and US$16.77 billion in 2010.

“Foreign investment re-entered the market aggressively in the back-half of 2010, and it began targeting just the top two trophy markets: New York and Washington, D.C. Now, those gateway cities are almost tapped out and some foreign investors are paying as much as $700 per square foot for prime real estate properties,” said Steve Collins, managing director, Americas of Jones Lang LaSalle’s International Capital Group. “Today, the demand is increasing, but there isn’t enough quality product to buy in the top two core U.S. markets, so interest will extend to five markets in the next six months and into 8 to 10 markets throughout the country by the end of the year.”

In 2010, Europe and the Middle East boasted more cross-border transactions (53 percent) than domestic (47 percent), with cross-border volumes made up equally of inter and intra-regional activity. In 2010 cross-border volumes in Europe and the Middle East reached US$72 billion of a total market of US$136 billion, which was a 53 percent increase on 2009 when cross border accounted for US$47 billion of US$97 billion total European and Middle Eastern volumes.

Richard Bloxam, director of Jones Lang LaSalle’s EMEA Capital Markets group said: “With two of the most sought-after global markets in the region – namely London and Paris – and a large number of active global investors, it is no surprise that this region led the world once again in terms of cross-border activity of both buyers and sellers; we expect this trend to continue.”  

In Asia Pacific volumes were increasingly driven by cross-border activity during 2010 and reached 32 percent (US$27 billion) of overall volumes last year compared to 26 percent in 2009 (US$17 billion) and 47 percent in 2007 (US$57 billion) which was peak of the market.

Alistair Meadows, director of Jones Lang LaSalle’s International Capital Group, Asia Pacific commented: “Investors renewed desire to look at international real estate opportunities as we emerge out of the global financial crisis is not surprising given the improved market fundamentals; however, the longer term trend toward cross-border activity is a key part of Asia Pacific’s emergence as a major source of and destination for global real estate capital.”

Globally offices continue to make up the largest proportion of inter-regional investment transactions accounting for US$47 billion (58 percent of the total inter-regional market), which is the same proportion as in 2009 (US$30 billion).  Inter-regional hotel transaction volumes tripled year on year (from US$3.3 billion to US$10 billion) whilst the retail sector saw an increase of 31 percent in intern-regional investment volumes over 2009 (US$13 billion in 2009 to US$17 billion in 2010).  Jones Lang LaSalle expects these three sectors to remain the focus for inter-regional investors in 2011.

Paul Guest, head of Global Research Capital Markets Research commented on the emergence of new inter-regional purchasers in 2010: “New entrants featuring in the top 10 purchasers in 2010 included Malaysia, Saudi Arabia, India, and Canada.  Canadian and Malaysian capital was dominated by institutional investors whereas the Saudi and Indian purchasers were mainly high net worth individuals or private investors.  These new players replaced Australia, China, Spain and the UK who for various reasons including increased hedging costs, a refocus on domestic markets and sovereign debt issues, have been less active purchasers in 2010.”

The UK was the second largest market in terms of volumes traded, accounting for US$49 billion, following the United States which reached US$80 billion.  The UK also recorded the greatest volume of cross-border purchasers - US$20 billion globally during 2010 - and the highest proportion of inter-regional purchasers (over 25 percent), driven mainly by a strong interest in core London assets.

Notes to editors

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. Categorised 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.
 
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 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 60 countries from more than 1,000 locations worldwide, including 185 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 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 more than $41 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com.