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Jones Lang LaSalle’s Global Capital Markets Research shows smaller cities benefiting from cross-border investment in 1Q 2013
CHICAGO, May 9, 2013 — In the search for higher yields, major international real estate investors continue to broaden their scope, turning their attention towards smaller cities around the globe, with cities such as Atlanta and Houston becoming the major beneficiaries in the first three months of 2013. Overall global real estate volumes in the First Quarter reached US$105 billion—breaking the US$100 billion mark for the first time in five years, according to Jones Lang LaSalle Capital Markets research from 60 countries.
10 Largest Recipients of Cross-Border Investment, Q1 2012 & Q1 2013As with fourth quarter 2012, New York and Washington, D.C. were once again the most active U.S. cities for cross-border investment, with 2.9 billion and 900 million U.S. dollars, respectively, between January and March. Secondary markets such as Atlanta also attracted international investment, but it’s the “Energy Capital of the World” currently garnering the most attention.
“Houston has been a hotbed for international capital for a while, with US$1.4 billion spent in the city by foreign and global investors in 2012. In the first three months of this year, Houston has had a number of landmark transactions, and we expect that pace to continue as the city provides higher returns as investors move up the risk curve,” said Steve Collins, International Director, Jones Lang LaSalle Capital Markets. “In fact, on recent transactions in markets like Boston, Chicago and Atlanta, we are seeing multiple—sometimes four or five--cross-border investors make offers on assets our firm is selling. These offers are being done with and without domestic sponsors. In two offerings, the cross-border investor came direct and selected a sponsor right before closing"
These are among the findings in Jones Lang LaSalle’s Global Capital Markets Research Report, 1Q 2013. Direct commercial real estate volume in the Americas was 38 billion for the quarter, a nine percent increase over the same period last year and just shy of the 40 billion invested in EMEA. While below the 61 billion closed in the last three months of 2012, EMEA’s 40 billion in investment was a 28 percent increase over first quarter 2012.
Rounding out the overall first quarter cross-border investment was Asia Pacific, which matched fourth quarter totals of 27 billion – a notable 26 percent increase over the same period last year. “An encouraging first quarter as volumes reach highs not witnessed for five years,” said Josh Gelormini, Vice President of Research with Jones Lang LaSalle “Despite the still challenging economic conditions globally, real estate continues to attract increasing allocations across the buyer spectrum, particularly from institutional capital, which is looking for income returns to match its liabilities. First quarter volumes demonstrate that investor confidence has and continues to improve.”
Noted Collins, “U.S. investors continued their spending spree despite uncertainty around the long-term fiscal position, but this activity was concentrated domestically rather than cross-border markets in the first quarter.”According to the Jones Lang LaSalle report, 25 percent of the U.S.’s investment strategy in 2012 was offshore, while 90 percent of acquisitions during first quarter took place domestically.
Global funds, which doubled their year-over-year spending during first quarter, were the largest cross-border purchasers followed by the U.S. and focused almost solely on the U.S. and EU. Meanwhile large institutions continued to allocate capital to real estate through cross-border acquisitions, many structuring joint ventures to invest with partners.
“REITS have taken advantage of looser monetary policies and have become net buyers while corporates have taken a more cost-saving strategy and became net sellers with a number of large sale & leaseback deals,” Collins noted.
“Retail has shown strong year-over-year growth as the supply of large shopping centers has increased,” added Gelormini. “Further, hotels have recorded the largest year-over-year growth this quarter, challenging industrial for the third most popular market sector.”
2013 Outlook“Improving global economics and trade should boost the amount of deals done cross-border as investors are becoming more confident in the macro outlook and seek opportunities outside their home market,” said Collins. “The encouraging results from the first quarter mean that we are not adjusting our forecasts for the full year volumes; we stick by our 2013 forecast of $450-500 billion with investors favoring real estate in prime locations, matched by increasing activity in secondary markets.”
Editor’s Note:Property types in the Global Capital Flows report include hotels, office, industrial and retail.
What is Global Capital Flows?Jones Lang LaSalle’s Global Capital Flows analysis provides a set of data designed to help investors understand how commercial real estate capital in the aggregate is moving around the world. The data does not reflect Jones Lang LaSalle’s own business and is not indicative of Jones Lang LaSalle’s overall performance or the portion of the overall market in which Jones Lang LaSalle participates. 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: - http://www.joneslanglasallesites.com/gcf
Jones Lang LaSalle Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm’s in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In 2012 alone, Jones Lang LaSalle Capital Markets completed $63 billion in investment sale and debt and equity transactions globally. The firm’s dealmakers completed $60 billion in global investment sales and buy-side transactions, equating to nearly $240 million of investment trades completed every working day around the globe. The firm’s Capital Markets team comprises more than 1,300 specialists, operating all over the globe.
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About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management. For further information, visit www.jll.com.
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