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Jones Lang LaSalle forecasts direct investment into commercial real estate globally could reach USD500bn in 2013

Asia Pacific volumes expected to grow significantly this year to USD110bn

Direct investment into commercial real estate in Asia Pacific amounted to USD94.6bn in 2012, down slightly from USD98.6bn in 2011 (down 4 percent), according to new research from Jones Lang LaSalle. The firm’s latest Global Capital Flows research report​ shows that direct investment into commercial real estate was up 2 percent in 2012 on the previous year at USD443bn. The Americas accounted for USD190bn in 2012 and EMEA USD159bn. 

Stuart Crow, head of Asia Pacific Capital Markets, Jones Lang LaSalle said: “Investment levels in Asia Pacific in 2012 remained strong although slowed a little during the middle of the year due to the Euro Debt Crisis and fiscal cliff concerns. Activity returned strongly towards the end of the year and we see this flowing into 2013.” 

Jones Lang LaSalle is forecasting that volumes in the Asia Pacific region could increase to USD110bn in 2013, which would be a year on year growth rate of 16 percent over 2012. 

Stuart Crow added: “We are expecting to see higher transaction volumes this year driven largely by the strength of the listed real estate markets, the continued low interest rate environment and the very noticeable return of large global investors to the region. We see numerous new investors targeting the region and a fresh wave of groups who are looking to move higher up the risk curve.” 

Volumes globally in the final quarter of 2012 stood at USD147bn, which was the highest quarterly volume since Q4 2007 when almost USD160bn was traded. It was also 24 percent higher than the fourth quarter 2011. Much of this boost came from the U.S. which saw transaction volumes up 44 percent quarter on quarter and up 60 percent year on year. US investors also increased their overseas activity in 2012 with a 26 percent increase over 2011. 

Alistair Meadows, Director, International Capital Group Asia Pacific said: “Inflows into Europe continued to dominate the capital moving around the globe in 2012. We saw net investment into Europe up 36 percent, which was due in part to an 80 percent increase from investors in Asia Pacific taking advantage of opportunities. These opportunities have been created by attractive assets coming onto the market as investors who bought in 2008 and 2009 are choosing to capitalise on value gains, as well as some distressed properties becoming available. 

“We expect Chinese offshore investment to become one of the major sources of new capital this year and beyond as insurance companies are now allowed to invest in overseas real estate, having not been able to previously.” 

He added: “We are forecasting global volumes will reach between USD450-500bn in 2013, due to increased levels of equity coupled with a strategic reallocation to real estate by institutional investors.” 

Asia Pacific Highlights: 

• Major markets in 2012 delivered mixed results, with falls in total volumes in China (-26 percent) and Singapore (-8 percent), steady performances in Australia (2 percent), Hong Kong (2 percent) and Japan (5 percent) and a solid improvement in South Korea (9 percent). 

• Cross border purchasers accounted for USD19.7bn in 2012, equivalent to 21 percent of all acquisitions. Australia continued to lead the way in attracting foreign capital with USD6.5bn through the year, followed by Japan (USD5.1bn), China (USD4.3bn) and Hong Kong (USD1.8bn). These four markets accounted for 80 percent of the regions cross border acquisitions throughout the year. 

• Singapore was the source of one third of all cross border capital deployed in the Asia Pacific region in 2012 with over USD6.5bn in acquisitions. Other major sources of cross border capital include global investors (USD2.4bn) as well as groups from the US (USD2.3bn), Canada (USD1.9bn) and China (USD1.65bn).  

• In 4Q 2012, domestic investors dominated the investment sphere with cross border transactions accounting for just 23 percent of volumes. Over the full year, cross border transactions have accounted for 30 percent of the total. There were also a number of cross border investors on the sell-side in the fourth quarter. In terms of purchasers, cross border purchasers made up 10 percent of acquisitions, short of the 20 percent recorded for the full year. 

• Also during the quarter, office assets were heavily traded relative to other asset classes. Office deals made up over 56 percent of total investment volumes, with retail falling slightly below its long-term average to 18 percent of the total volumes. 

– ends –   

Notes to editors 

1. Jones Lang LaSalle’s Global Capital Flows analysis provides a set of data designed to help investors understand how commercial real estate capital is moving around the world. The findings are released quarterly, first in the transaction volume analysis represented in this release, and secondly in a broader quarterly report which will be issued in the following weeks. All of the current Global Capital Flows data can be found in an interactive website which also acts as a portal for media and clients to access Jones Lang LaSalle’s global capital markets research. Bookmark this site for the most up to date global real estate data: 

2. Our latest Global Capital Flows infographic is available to download.