Global, direct investment in real estate totaled a record $382 billion during the first half of 2007, a 16.6% increase over the same period last year and more than the entire volume of global investment in 2003, according to provisional figures from Jones Lang LaSalle.
“For the remainder of 2007, Jones Lang LaSalle expects global real estate markets to remain strong, however we expect investors to become increasingly selective about markets,” says Tony Horrell, CEO of Jones Lang LaSalle’s European Capital Markets Group. “Globally we continue to see a weight of money targeting the sector — evidenced by the record real estate funds raised by private equity in recent months. Cross border investment remains strong, driven by global, Middle East, North American, Irish, German and Australian funds.”
The Americas, Europe and Asia Pacific achieved record investment volumes in the second quarter, which marked 16 consecutive quarters of global investment growth. In the Americas, total investment surged 32% to $170.7 billion, primarily driven by the trading and re-trading of prime United States properties acquired as a part of private equity led REIT privatizations and subsequent portfolio break-ups. In a notable change from 2006, the majority of prime assets were sold to domestic investors. Overall in the region, however, cross-border investment increased (again). Latin America had a strong half as the market became increasingly sought-after by global, North American and European investors.
European investment volumes rose 4% to $156.6 billion, with the United Kingdom, Germany and France accounting for more than two thirds of volumes. The UK experienced a strong quarter for trophy assets, with six single assets valued at more than $1 billion trading, compared with only one in full-year 2006. Prime trophy assets also attracted very competitive bidding in Germany and France.
Global, U.S., Irish and Spanish investors were dominant cross-border investors, while German funds made a strong return to the European investment markets, many having significant liquidity after heavy selling activity in 2006.
Investment in Asia Pacific rose 12% to $55 billion, with a significant proportion of the increase representing additional cross-border investment. Japan, China and Singapore represented the strongest real estate markets in the region. Singapore became 2007’s hottest global market, with prime capital values increasing by 50% in the first half of the year, fueled by astounding rental growth and yield compression.