Global investment surges ahead
Global direct real estate investment for 2005 will have jumped to an all-time high of $550bn (e454.7bn) according to a Jones Lang LaSalle study. The property specialist recorded an 18% jump in global direct real estate investment over the first half of 2005 to a record $237bn.
Cross-border investment leapt 21% over the same period to reach $52bn. Inter-regional sales (where capital flows between the big three continental markets of US, Europe and Asia) rose by 60% in the first half of 2005, indicating a significant increase in investors’ exposure to international property.
Although starting from a smaller base, the Asia Pacific market is experiencing the strongest global growth as it catches up with more developed regions. Transactions within Asia Pacific reached $31.86bn during the first half of 2005, up 45% on the same period in 2004.
Tony Horrell, Jones Lang LaSalle’s international director for Europe, said: “The only surprising thing about these figures is that they’re not even greater – as they could have been if certain investors had been quicker to get their capital deployed.
“The globalisation trend in investment is thoroughly embedded as is the seasonality element, which means the second half of 2005 was a lot stringer than the first. We saw some major US-investor activity in Asia which will reinforce the end-2005 figures.”
The large, transparent office markets of the US, UK and France were the most traded markets for global investors last year and showed relatively balanced purchase and sales activity. France experienced a net inflow of capital into the office market, driven by US and Middle Eastern investors.
Within Asia, Japan dominated the market with strong capital inflows from the US and Europe. But over half of this capital went into the industrial market and there was virtually no international activity in the office sector.
Over the medium term, Jones Lang LaSalle expects a resurgence in capital outflow from Japan, as was the case in the late 1980s. The company noted that although Japan dominates the Asia market today, India and China are both growing destinations attracting capital. The value of Chinese transactions recorded in the first half of 2005 was over two and a half times higher than the full-year total for 2004.
Jones Lang LaSalle anticipates strong growth in the real estate market across the Asia Pacific region due to factors such as the compulsory (pension) savings schemes in countries like Hong Kong, Singapore and Australia, and the discretionary savings of the Japanese and Chinese, providing a huge impetus for the region’s emerging REIT markets.