Independent commercial real estate researchers based in the U.S. have embarked on ambitious expansions across the globe to create more transparency in international property markets.

Institutional investors exploring overseas buying opportunities are driving the build out, demanding more and better data in emerging markets and even in some developed countries where statistics are still hard to come by.

The researchers, which include Real Capital Analytics, Smith Travel Research, Torto Wheaton Research and Lodging Econometrics, have spent tens of millions of dollars over the past few years to establish a worldwide presence. Generally the firms are partnering with foreign companies, opening offices overseas or combining their strategies.

In many cases, the data providers started offering international real estate data products just as the credit crunch and recession began putting a stranglehold on the worldwide economy.

The sharp downturn has made potential real estate investors and developers more cautious, and ultimately could hurt demand for the new data products.

“Given the budget situation and more uncertainty, clients are a little slow to add another product to their research tools at this point,” says Arthur Jones, a senior economist with Boston-based Torto Wheaton Research, which last year began covering 15 office markets in Asia. “But we're hearing that the need for data is still great.”

Indeed, in some cases the global downturn has put a premium on information. New York-based Real Capital Analytics, which launched its international expansion in 2005 and began releasing its first global reports in January 2008, tracked some $1.2 trillion in commercial property sales around the world in 2007. Through the first 11 months of 2008, sales fell to $513 billion.

“The only way to get investors back in the market is for buyers to feel comfortable with where true pricing really is,” says Dan Fasulo, managing director of research for Real Capital Analytics, which tracks property sales of more than $10 million for its global reports compared with $2.5 million for its U.S. products.

“Nobody wants to be the investor who jumps in and buys a property only to find out that it's worth 20% less the next day. Investors across the world are waking up to the fact that we need to have transparency,” adds Fasulo.

The boom before the bust

Investment interest overseas surged earlier this decade and coincided with increasing trade between countries that encouraged corporations, manufacturers and law firms to expand into Asia, Europe and other global markets. The healthy business climate also enhanced the free flow of capital across borders, particularly for real estate.

As a result, U.S. mutual funds, private equity firms, developers and others started raising cash for overseas investing. Investors are still interested in buying real estate overseas markets despite slowing economies, says Kevin White, senior real estate economist for Boston-based Property & Portfolio Research. The financial crisis has simply forced the market to pause, he suggests.

“Over the last couple of years, investors awoke to the importance of putting money to work outside their own borders to exploit opportunities,” says White, who uses Real Capital's data in evaluating markets for Property & Portfolio's investment clients. “The underlying drivers remain in place: a desire for better diversification, a broader investment universe, and potentially superior returns.”

Although real estate investment activity has waned in recent months, interest in overseas properties and growing international trade helped spark the largest lodging expansion ever during the first decade of the 21st century, says Patrick Ford, president of Portsmouth, N.H.-based Lodging Econometrics.