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United States is recipient to more than triple the investment volume of its nearest competitor country in 2012
NEW YORK, Feb. 14, 2013 - The United States is the world’s largest and most liquid real estate market, and will remain the top destination for direct commercial real estate investment in 2013. According to Jones Lang LaSalle’s Capital Markets experts attending this week’s Association of Foreign Investors in Real Estate’s (AFIRE) annual Winter Conference in New York, the world’s investors will continue to flock towards the U.S. as a safe haven in 2013. The U.S. absorbed $163.7 billion of real estate investments in 2012; more than triple its nearest competitor country, and by far, Canada has been the most dominant foreign investor in U.S. assets during the past three years.
Canadian pension funds had the most significant cross-border activity into the U.S. in 2012, with the largest volume of activity reaching $2.11 billion executed by CPP Investment Board. For three decades until 2005, Canadian pension funds were limited to a ceiling on the amount of investment they could deploy outside of the country. However with the elimination of the Foreign Property Rule (FPR), funds are now free to invest larger allocations. Much of this activity has been targeted in the retail space, with particular interest in coastal markets such as Seattle, San Diego and San Jose.
“Canada emerged from the recession in better financial shape due to its banks issuing recourse loans and suffering fewer hits during the mortgage meltdown versus other countries. These deeper pockets allowed Canadians to invest in U.S. real estate when values were most suppressed,” said Steve Collins, International Director of Jones Lang LaSalle’s Capital Markets. “For 2012, Canadian investment represented about a third of all foreign investment into the U.S., but this Canadian pipeline could slow as property values rise and our nearest neighbors realize some of their gains.”
In the coming years, foreign direct investment in U.S. real estate is expected to increase as various offshore pension funds and sovereign wealth funds mobilize to place more capital. Emerging market funds are targeting higher allocations to real estate in the 10 to 15 percent range, as compared to peers in developed markets where allocations are lower at 5 to 10 percent. According to AFIRE’s 21st annual survey released last month, 55 percent of respondents believe the U.S. is strongly regarded as providing the most stable and secure real estate investment opportunities, while Canada, the second-ranked country, achieved 18 percent of these votes.
“We expect new foreign players coming into the U.S. real estate market to target more top quality, well-leased office spaces as well as high-end retail properties, that are expected to gain further pricing ground in select markets. These property types are more desirable to larger pension and sovereign wealth funds as they are a closer match to their long-term liabilities,” concluded Marisha Clinton, Director of Capital Markets Research for Jones Lang LaSalle.
Further information will be released in early March.
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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 2010 alone, Jones Lang LaSalle Capital Markets completed $43 billion in investment sale and debt and equity transactions globally. The firm’s dealmakers completed $33 billion in global investment sales and buy-side transactions, equating to nearly $140 million of investment trades completed every working day around the globe. In the United States, Jones Lang LaSalle grew its office broker volumes by 257 percent in 2010 and is quickly gaining market share across all property types. The firm’s Capital Markets team comprises approximately 800 specialists, operating in 185 major markets worldwide.
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. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management. For further information, visit www.jll.com.
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