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Global Investment Doubles 2009 Levels in Q2

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Property Funds  Commercial Real Estate Investment  Global Real Estate Recovery 

By - Friday 23 July 2010

New research has found that in the second quarter of 2010 global direct commercial real estate investment volumes reached US$66 billion.

The figures, released by Jones Lang LaSalle, are similar to the ones seen during the first quarter of the year and as the sector begins its recovery it represents almost twice as much activity in the market compared to the lows of one year ago.

In total, the statistics show that direct commercial real estate investment levels reached US$130 billion for the first six months of 2010.

This would seem to suggest that global real estate recovery is well underway in the majority of international markets, with an increase in interest in commercial developments by real estate investors.

However, the volume of investment is just a fraction of what was seen before the financial crisis as growth of property values slows and investors remain concerned about the global economy.

In addition, despite most regions posting an increase in investment levels, Asia Pacific property reported a 34 per cent decrease compared to the first quarter of 2010.

Elsewhere, the Americas saw an increase of 54 per cent and Europe, the Middle East and Africa (EMEA) was up 15 per cent during the time period.

Arthur de Haast, head of the International Capital Group (ICG) at Jones Lang LaSalle, said that the research was good news for many global commercial real estate investment markets, with the figures reflecting the return in interest in certain countries which had been witnessed recently.

"That said, volumes are still well below pre-credit crisis levels and since third quarter 2009 incremental growth has been relatively modest," he added.

Regional Differences

Among the most interesting factors to come out of the report were the significant differences which were seen within individual regions.

For example, in the Asia Pacific region notable falls were registered in China, Australia and Japan - perhaps as a result of spiralling property values - but Hong Kong and Taiwan enjoyed an increase in interest.

In EMEA, London has cemented itself as the world's most active market, although individuals are increasingly turning to France, Germany, the Nordics and Poland for real estate investment opportunities.

The Americas were led by Brazil, which has shown the "strongest growth" on a global sale in the last three months, while Canada has also seen strong improvements, the report noted.

Slowdown in Growth

The news follows data released by the Investment Property Databank (IPD) which suggested that commercial property values in the UK market were no longer rising at the same level as before.

According to figures released by the IPD, during April values rose by just 0.8 per cent, with some investors now unsure whether long-term returns can be realised.

Added to this, news that the International Monetary Fund (IMF) has lowered its forecast for UK economic growth for 2011 will also be a blow to recovery, with property markets often suffering alongside the economy.

The IMF now predicts that output in the country will rise just 1.2 per cent this year and 2.1 per cent in 2011, compared to original estimations of 1.3 and 2.5 per cent respectively.

Change in Buying Process

Commenting on the future for the markets, Mr de Haast anticipated that the year would finish with volumes around the US$300 billion mark - a 40 to 50 per cent increase compared to 2009.

"This is still less than half the pre-credit crisis levels of 2006 and 2007, but we must take into account the fact that those were heady years for commercial real estate investment, with unprecedented record trading volumes," he said.

Meanwhile, private equity fund company Meyer Bergman told the Wall Street Journal that the way buyers are going about purchases has changed.

"At the peak of the boom, investors who took too long to study a fund risked missing the market entirely," said Marcus Meijer, chief executive officer of the organisation.

"Now, it's not unheard of to take 12 to 18 months just to get to the point where an investor is willing to start doing diligence."

While investment remains below the "heady" levels witnessed before the crisis, it is clear that a number of markets around the world are seeing an increase in interest in commercial property.

Buoyed by a few well-performing destinations, such as London and Brazil the future looks good, although overpriced markets in the Asia Pacific region alongside a more thoughtful buying process means that full recovery could be a drawn-out affair.ADNFCR-3415-ID-19901039-ADNFCR

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.

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