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News release

CHICAGO, IL

Foreign Investment into U.S. Commercial Real Estate Grows Into Secondary Markets

Volumes reach $121B in 2Q 2013, up 16 percent from first quarter


CHICAGO, Aug 6, 2013 — Global direct commercial real estate investment volumes reached $121 billion in the second quarter 2013, according to Jones Lang LaSalle’s latest Global Capital Flows report. That marks a 16 percent increase from the first quarter of the year and 10 percent higher than 2Q 2012. Volumes came in at $225 billion for the first half of 2013, with all three regions experiencing growth year over year, as concerns over monetary tightening measures failed to deter sentiment. Other highlights include:

  • London remains the most actively traded city; while more secondary cities are seeing increased overseas investment flows, particularly those in the United States in this half of the year as they increasingly attract foreign investors.
  • The South Koreans, Chinese and Norwegians increased their overseas buying activity over the first half of the year, acquiring prime assets in the United States, United Kingdom, France and Germany.
  • U.S. investors remain most active purchasers of property globally and demand is proving increasingly higher than supply with seven dollars of capital pursuing every one dollar of prime product.
  • During the first half, cross-border activity grew slightly over this time last year to 42 percent of all transactional activity.

During the first half of the year, cross border activity has grown to $71 billion (13 percent up on 1H 2012) to a total of 42 percent of all transactional activity. The report shows that net inter-regional flows from the Americas and Asia Pacific into Europe over the first half of 2013 increased by 18 percent from 1H 2012 to top $12 billion.  While the larger markets such as the UK, Germany and France experienced some of the highest levels of global cross-border activity, capital is becoming increasingly widespread across the continent as investors look further up the risk curve for higher yields. Yet, despite this increased appetite for risk, the report shows that investors are still focusing the majority of their money into quality assets in prime locations with seven dollars of capital pursuing every dollar of prime product.

Steve Collins, International Director, International Capital Group, Jones Lang LaSalle commented: “We continue to see new capital emerge from Asia Pacific, as investors look to diversify their portfolios into prime global cities such as New York and London. Over the past six months, Chinese and South Korean investors have driven this growth, especially in the residential and office sectors, and we expect emerging market institutional capital to be a major theme within commercial investment markets for many years to come.”

Evidence of growing investor risk appetite is evidenced in the number of U.S. cities outside of New York benefitting from overseas investment in the second quarter.  The Canadians have been particularly active in Seattle where the Wells Fargo centre was sold to Caisse de Depot for $388 million in June.  Middle Eastern investors have continued their preference for hotels with purchases in the United States.

This spread of investor focus is something JLL is seeing around the world as more opportunities present themselves in secondary locations and investors are more encouraged to take on additional risk by a slowly improving global economy.  Pricing in the major cities of London, New York and Paris continues to be affected by the strong weight of money making secondary assets look much more attractive.

Arthur de Haast, Lead Director, International Capital Group at Jones Lang LaSalle said: “Asia Pacific and the Americas are seeing continued growth in investor appetite for direct commercial property; however, in contrast to what we witnessed last year, both new and experienced investors are taking on additional risk. This has led to increased capital into secondary cities, particularly in Europe and the U.S. This more broad based activity should continue and will sustain volumes over the second half of the year, which is traditionally busier than the first, maintaining our forecasts of $450-500 billion for the full year 2013.”

During the first half of the year, cross border activity has grown to $71 billion (13 percent up on 1H 2012) to a total of 42 percent of all transactional activity. The report shows that net inter-regional flows from the Americas and Asia Pacific into Europe over the first half of 2013 increased by 18 percent from 1H 2012 to top $12 billion.  While the larger markets such as the UK, Germany and France experienced some of the highest levels of global cross-border activity, capital is becoming increasingly widespread across the continent as investors look further up the risk curve for higher yields. Yet, despite this increased appetite for risk, the report shows that investors are still focusing the majority of their money into quality assets in prime locations with seven dollars of capital pursuing every dollar of prime product.

Steve Collins, International Director, International Capital Group, Jones Lang LaSalle commented: “We continue to see new capital emerge from Asia Pacific, as investors look to diversify their portfolios into prime global cities such as New York and London. Over the past six months, Chinese and South Korean investors have driven this growth, especially in the residential and office sectors, and we expect emerging market institutional capital to be a major theme within commercial investment markets for many years to come.”

Evidence of growing investor risk appetite is evidenced in the number of U.S. cities outside of New York benefitting from overseas investment in the second quarter.  The Canadians have been particularly active in Seattle where the Wells Fargo centre was sold to Caisse de Depot for $388 million in June.  Middle Eastern investors have continued their preference for hotels with purchases in the United States.

This spread of investor focus is something JLL is seeing around the world as more opportunities present themselves in secondary locations and investors are more encouraged to take on additional risk by a slowly improving global economy.  Pricing in the major cities of London, New York and Paris continues to be affected by the strong weight of money making secondary assets look much more attractive.

Arthur de Haast, Lead Director, International Capital Group at Jones Lang LaSalle said: “Asia Pacific and the Americas are seeing continued growth in investor appetite for direct commercial property; however, in contrast to what we witnessed last year, both new and experienced investors are taking on additional risk. This has led to increased capital into secondary cities, particularly in Europe and the U.S. This more broad based activity should continue and will sustain volumes over the second half of the year, which is traditionally busier than the first, maintaining our forecasts of $450-500 billion for the full year 2013.”

Editor’s Note:
Property types in the Global Capital Flows report include hotels, office, industrial and retail.

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About Jones Lang LaSalle
Jones 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 $46.3 billion of real estate assets under management. For further information, visit www.jll.com.