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CHICAGO, LONDON, SINGAPORE

Jones Lang LaSalle:  Investors More Bullish on Cross-Border Transactions

Asia Pacific investors look to Americas and Europe for more opportunities


CHICAGO, LONDON, SINGAPORE, 03 February 2012 – Jones Lang LaSalle’s Year End 2011 Global Capital Flows report shows there was US$410.6 billion of direct commercial investment in 2011, a 28 percent increase over 2010.  Highlights from the report include:

• The level of cross-border purchasing activity rose from 27 percent in 2010 to 31 percent in 2011

• Cross-border purchases remain stable, accounting for 30 percent of total volumes in Q4 2011

• London finishes 2011 as most active city globally, with New York, Paris, Tokyo and Singapore rounding out the top five.

• Transactional volumes in 2012 expected to match that of 2011, but downside risks remain prevalent

• Asian capital is increasingly active cross-border, both within and outside the region

• The office sector continues to be the favourite with investors, although retail continues to grow more popular 

“Despite the financial crisis over the past two years, commercial real estate remains a core asset class for many investors,” said David Green-Morgan, Global Capital Markets Research Director at Jones Lang LaSalle.  “The year 2011 finished with a bang and it was the activity in the European markets that grabbed the headlines in the final quarter of the year, against most people’s expectations.”

In the fourth quarter of 2011, global direct investment volumes were four percent higher than the third quarter 2011, at US$106.2 billion.  This marks only the third time in the last three years that volumes had passed the US$100 billion mark.  Compared to Q4 2010, global direct investment transactions were down six percent in Q4 2011. 

Cross border purchases as a proportion of the total remained very stable between Q3 and Q4 at 30 percent.  However, on an annual basis, investors have been more bullish, increasing the level of cross border purchasing activity from 27 percent in 2010 to 31 percent in 2011.  Total cross border purchases for 2011 was almost US$125 billion, a 47 percent increase over 2010. 

“This is a firm indication that investors are prepared to increasingly look outside their own countries for suitable opportunities when macro circumstances allow,” said Arthur de Haast, Lead Director of the International Capital Group at Jones Lang LaSalle.  “However, cross-border activity only tends to do well when the global economy is supportive.  If investor sentiment turns more negative, then it will be cross-border and inter-regional flows that will be the first casualty.”

Alistair Meadows, Head of International Capital Group Asia Pacific at Jones Lang LaSalle confirmed: “Asian capital, both institutional and private, is increasingly active cross-border, both within and outside the region.  For example Asian investment into the Americas increased 130 percent to reach US$2.3 billion, while interest in the London market in particular saw volumes for Europe increase 42 percent year-on-year to some US$5.6 billion.”  
 
Regional Perspectives
The U.S. maintained its number one spot as the single largest source of real estate capital with more than US$25 billion worth of purchases in Q4; this was down 17 percent on Q3.  The upside came in Europe, with the majority of the main European markets, apart from the UK, all increasing.  The French led the way with a doubling of investment volumes domestically and cross border to US$7.6 billion in Q4 from US$3.4 billion in Q3.  This helped push their 2011 volumes 55 percent higher than 2010.
 
Top Investment Targets
London remained the most actively traded city in 2011 (US$24.3 billion) with New York City (US$19.2 billion) climbing into the second position. Asia Pacific now has five of the top ten most active cities globally with Shanghai moving up the ranks to 9th place from 13th in 2010, trading US$7.2 billion in 2011 on the back of a strong Chinese economy.
 

Rank 2011

Rank 2010

City

FY 2011 ($ US bn)

FY 2010 ($ US bn)

% change 2010-2011

1

1

London

24.3

21.0

15%

2

4

New York

19.2

11.0

75%

3

3

Paris

14.0

11.3

24%

4

2

Tokyo

13.9

19.1

-27%

5

6

Singapore

9.1

7.3

25%

6

5

Hong Kong

8.3

8.4

-2%

7

7

Washington D.C.

8.0

6.4

24%

8

8

Seoul

7.7

6.1

27%

9

13

Shanghai

7.2

4.2

71%

10

11

Los Angeles

6.8

4.6

49%

*Source: Jones Lang LaSalle

Sectors
The office sector continues to be the favourite with investors, although retail is continuing the inroads it has made in recent years, reaching almost 30 percent of total transactions in 2011 which is, the highest we have recorded.  Retail, industrial and hotels have all taken market share away from the office sector over the last two years.  Mixed-use sites lost the most in 2011, with transactional volumes down 35 percent from 2010, and down more than 50 percent from Q3 to Q4 2011.

– ends –
 
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.  All of the current Global Capital Flows data can be found at our 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 and commentary: - http://www.joneslanglasallesites.com/gcf

1. Intra-regional: Both purchaser and vendor originate from the region where the asset is located.  For instance, a US REIT purchasing in Canada, or a German Open Ended Fund selling in the UK.
2. Inter-regional: Purchaser, vendor or both originate from outside the region where the asset is located. For instance, a US REIT purchasing in Denmark, or an Australian Pension Fund selling in Canada.
3. Cross-border: Refers to any purchaser, vendor or both that originates from outside the country in which the relevant transaction occurs. Categorised into Inter-regional and Intra-regional transactions.
4. Domestic: Refers to any investor that originates from within the country in which the relevant transaction occurs. Transactions involving both “domestic” purchaser and seller are referred to as “domestic” activity.
5. Entity-level transactions, development projects and multi-family residential investment are excluded from our provisional data and may change.
6. Jones Lang LaSalle converts transaction values into USD at the average daily rate for the quarter in which the transaction occurred. In other words, the foreign exchange effect has not been removed.
7. Global Funds are funds which raise capital in multiple regions.