Property deals hit $75bn in Q1; down 23pc
Dubai, April 11, 2012
Direct commercial property transaction volumes in the global arena during the first quarter of 2012 were subdued at $75 billion, marking a drop of 23 per cent compared to the same period last year, said a report.
Total volumes in the fourth quarter of 2011 were revised up to $112 billion, making it the most active quarter since Q2 2008, while full year 2011 volumes were also revised up to $418 billion, the fourth highest year on record, according to Jones Lang LaSalle Capital Markets Research.
All major commercial property markets globally recorded a quieter start to the year after a very active 2011, particularly in the final quarter.
Also, substantial one-off transactions in established markets, such as the sale of the Trafford Centre Shopping Centre in the UK for $2.6 billion that enhanced volumes in Q1 2011 were not repeated in Q1 2012, leading to a fall in total volumes recorded.
The decline was also due to sustained economic pressures restricting the availability of debt finance, especially for new borrowing, the report said.
Arthur de Haast, head of the International Capital Group at Jones Lang LaSalle said: “Whilst volumes are down in Q1 2012 and the economic backdrop remains uncertain, the underlying attractiveness of real estate continues due to strong demand and sound fundamentals. The final quarter of 2011 was one of heightened uncertainty in Europe, but reassuringly policy makers realised the seriousness of the situation and took the appropriate action, which helped to stimulate activity across the continent.”
“Volumes and sentiment in the US continues to improve with growth increasing by 16 per cent on a year on year basis in Q1 2012, on the back of improving economic indicators. Canadian and Mexican volumes increased more than 50 per cent over the same period.”
“2011 was the second strongest year on record for Asia Pacific with annual volumes at $98 billion. Despite a slowdown in Q1 2012 compared to Q1 2011, we expect performance to improve during the coming months as monetary and fiscal policy is gradually loosened around the region,” he added.
David Green-Morgan, Global Capital Markets research director at Jones Lang LaSalle said: “Commercial property continues to draw capital and interest from institutional investors, increasingly through allocations diverted away from equities, commodities and other asset classes. This trend will continue as the attraction of fixed assets increases in line with the predicted rise in global inflation over the medium-term.”
“Whilst the global economic road ahead might not be completely smooth, investor sentiment remains positive. The on-going debt issues in commercial property will continue to pose problems for some and present opportunities for others all of which will contribute to transactional activity.”
“Whilst the prime, major cities of the world such as London and New York will continue to attract large amounts of capital we expect investors to examine more closely the increasing number of opportunities in secondary markets as pricing in this area continues to adjust,” de Haast concluded.
While investors remain somewhat cautious most are continuing to execute their strategies albeit with longer transaction times and more detailed underwriting.
Global commercial real estate volumes in Europe, Middle East and Africa (EMEA) stood at $166 billion in 2011, against $155 billion in the Americas and $98 billion in Asia-Pacific.
Given the weight of capital available Jones Lang LaSalle expects full year 2012 transactional volumes to be consistent with 2011 at circa $400 billion, with a number of portfolio deals globally expected to boost activity. – TradeArabia News Service