The requested news item does not exist. Please return to News
Global, US and Singaporean investors emerge as the most active cross-border sources of capital
CHICAGO, LONDON, SINGAPORE, Aug. 15 , 2011 — Cross-border transactions rose 50 percent to comprise half of the $103.5 billion of direct commercial real estate investment transactions completed in the second quarter of 2011, according to Jones Lang LaSalle’s new Global Capital Flows report. Given the strong start to the year, Jones Lang LaSalle still expects market volumes to reach its full year forecast of $440 billion, so long as current market volatility and uncertainty abates and there are no further significant economic setbacks. In an era of instability, good quality commercial property will benefit, but deals, particularly larger ones, will take longer to complete.
“In the first half of this year, we saw firms investing domestically and the private equity and unlisted funds investing across borders,” said Arthur de Haast, Head of the International Capital Group at Jones Lang LaSalle. “Funds are being more cautious with a focus on investing primarily at home and trusting experienced managers with their cross border investments. This trend should continue through the second half of the year if the economic environment remains uncertain.”
In net investment terms , global funds were by far the most active investors with net purchases of more than $13 billion. Singapore was the next most active with $2.1 billion and Sweden third with $800 million of activity.
Alongside the global funds, which by their nature led net cross-border activity, Singapore was the second most active net cross-border purchaser in Q2 2011 as investors looked abroad for returns due to the capital appreciation occurring domestically. Kazakhstan and Indonesia both accounted for around $550 million of net purchases in the quarter; the latter was almost exclusively made up by the purchase of Aviva Tower in London.
The top ten markets globally which attracted the most investment included four markets in Asia (Hong Kong, Seoul, Shanghai and Singapore); three in the Americas (New York and Washington, D.C. and Toronto) and three in EMEA (London, Frankfurt and Paris).
 All currency figures in this report are US dollars, unless otherwise noted. These are converted from local currencies using a quarterly average rate. Net investment measures the total amount of acquisitions a region made minus disposals.Groups that raise capital globally from multiple regions, and less than 70% of the capital is from a particular country.
Top 10 Cities in Q2 2011 – investment volumes (excluding portfolios) in USD (bn)
De Haast added: “Risk aversion has risen over the past few months, meaning large deals are taking longer to close. While we’re seeing more transaction flow, in the second quarter there was a notable absence of big ticket, single asset transactions. There were fewer than ten $500 million-plus single asset sales this quarter which is roughly the same number as the second quarter of 2010. There were over 20 big deals in the first quarter and while a significant number of large transactions are in the pipeline for H2, the volatility of markets could cause further delay.”
Sources of Capital Capital around the globe is targeting both domestic and foreign investments. This quarter, the United States was once again the greatest source of capital purchasing $27.1 billion in direct commercial real estate, up $7 billion from first quarter, but the increased volume was mainly spent domestically. The United States was also the third most active cross-border purchaser at $2.6 billion. The booming U.S. investment activity is largely home-grown with more than 110 US cities appearing in the firm’s database in the second quarter versus less than 90 in first quarter and just 60 in the second quarter of 2010.
TOP 10 US CITIES in Q2 2011 (excluding portfolio transactions) – new entrants compared to Q1 2011 highlighted in bold
In addition to surging U.S. capital, the second quarter saw a doubling of acquisitions by the global funds to $20.6 billion and significant jumps in British, Canadian and German-sourced capital. Interestingly in these three countries most of the new capital was also spent domestically.
In the second quarter there was a total of $38 billion in cross-border purchases, up from $22.9 billion in the first quarter representing a 66 percent increase. This was driven by a doubling of foreign-bound Singaporean capital, led by several major acquisitions in China, and by a huge surge by the global funds. Purchase levels by the other top cross-border investors (the UK, Germany, the US and Canada) were broadly unchanged.
Speaking of Canada, the sharp recovery in the property capital markets also spread to our neighbor to the north, as transaction activity in the second quarter rebounded smartly in that country. Activity tripled from the previous quarter and resembled pre-recession quarterly levels (US$5.1 billion for all property types except multifamily). Domestic investors were by far the leading sources of purchase capital, accounting for 94 percent of all national volume in Q2. Demand among well-capitalized public REITs, pension funds as well as private cash-rich investors for property in their home market has blossomed over the first half of 2011, and motivated owners increasing took note of this during the second quarter. Public REITs and Institutional investors are expected to remain the leading investor groups and drive continuing healthy levels of market activity over the balance of 2011.
Preferred SectorsThe office sector was dominant in the second quarter, accounting for just over 40 percent of total volumes, down from 45 percent in the first quarter 2011. Retail’s share rose to 33 percent from 28.5 percent. The upsurge in hotels volumes (including casinos) led that sector to overtake industrial as the third most liquid sector globally with a share of eleven percent. Industrial meanwhile accounted for ten percent.
Notes to editors: bookmark our global data repository
Jones Lang LaSalle’s Global Capital Flows analysis provides a set of data designed to help investors understand how commercial real estate capital is moving around the world. The findings are released quarterly, first in the transaction volume analysis represented in this release, and secondly in a broader quarterly report which will be issued for the second quarter in the following weeks. All of the final Global Capital Flows report data can now be found in interactive website which also acts as a portal for media and clients to access Jones Lang LaSalle’s global capital markets research. Bookmark this site for the most up to date global real estate and data at http://www.joneslanglasallesites.com/gcf
Historic Global Direct Commercial Real Estate Volumes, US$ billion
About Jones Lang LaSalle
+65 6494 3641
+1 312 228 2139