Global direct real estate investment reaches record $290b.
Tony Horrell, CEO of Jones Lang LaSalle's International Capital Group commented: "Real estate markets are continuing their strong evolution into a global asset class, with cross-border investment now representing 44% of total volumes, compared with 34% for the first half of last year.
"The real proof of this globalization is that inter-regional investment, meaning transactions involving parties not from the region where the asset is located, now represent 31% of total volumes ($89 billion), up from 24% a year ago. In relative terms, the globalization of real estate investment has had the greatest impact on developing markets. In Central Europe and some Asian and Latin American markets, inter-regional investors are purchasing the majority of available prime quality stock."
"Across the world, fund managers are receiving record capital inflows as populations in developed countries approach retirement age," continued Horrell. Many of these funds are attracted by real estate's strong stable returns; and we are witnessing a significant re-weighting of investment portfolios in favor of real estate assets. With this in mind, we believe that 2006 is on target to be another record year for commercial direct real estate investment, and we expect total transactions to reach $600 billion."
According to Noble Carpenter, International Director, International Capital Group--Americas, "It is particularly interesting that indirect funds, principally REITs, valued at almost $30 billion were privatized in the U.S. This is not a trend we are witnessing elsewhere; indeed more countries are planning to introduce REITs in the near future, including the UK and Germany."
U.S. investors are deepening their exposure to real estate investment in Europe and Asia, and Middle Eastern investors continue to make significant net investments in Europe and the Americas. In the U.S., Middle Eastern investors made significant purchases in New York, Boston, Houston and Dallas. Large investments continue to be made in the Americas by funds from Asia Pacific, dominated by Australian funds that made large investments in California and Colorado. The U.S. markets that received the most attention from cross-border investors were New York (17%), Chicago (7%), San Francisco (7%) and Boston (5%).
As in 2005, the largest inter-regional investments were made by global sources of funds, which invested $22.3 billion in Europe (one-third of total inter-regional purchases). These global funds invested $39 billion globally, which is almost equivalent to all activity in the entire Asia Pacific region. Globally sourced funds purchased over 40% (by value) of all German commercial property traded in the first half of 2006 and were also significantly more active in the Americas and Asia.
Nearly 85% of total inter-regional purchases were in five markets: the U.S. (38%), Germany (19%), the UK (14%), France (8%) and Japan (5%). The share of inter-regional investment attracted to the U.S. and Germany has increased significantly since 2005, rising from 25% and 14% of total interregional investment respectively, and Germany has surpassed the UK as a favored destination. Globally sourced funds were very active in both markets.
Offices account for 48% of total inter-regional purchases (down from 52% in first half 2005) with $33 billion invested in the sector. Hotel investments have increased significantly to $16 billion (23% of inter-regional purchases, up from 20% in 2005); very large portfolios in the U.S. and across Europe have been purchased by interregional investors.
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|Publication:||Real Estate Weekly|
|Date:||Oct 11, 2006|
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