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News release

Chicago

Investors signal stamina, discipline amid market uncertainty

Fundamentals remain stable, and underwriting standards in check


CHICAGO, August 15, 2017 – The stock market is at record highs and markets have been stable, but macroeconomic and political uncertainty remain. Those factors are impacting real estate investment strategies in the U.S. as investors look selectively at opportunities and shift away from more conventional single-asset transactions.​

"There is a pullback in core opportunities in the market right now," said Jonathan Geanakos, President, JLL Capital Markets, Americas. "Investors are being selective, looking at longer hold periods and seeking new strategies as a means to increase real estate AUM and mitigate current market challenges. That being said, fundamentals remain strong, and foreign capital remains focused on U.S. real estate."

According to JLL's U.S. Investment Outlook, $177 billion of transactions closed across the office, multifamily, industrial and retail sectors in the first half of 2017, down 13.6 percent year-over-year. However, market sentiment is up year-over-year, and transaction levels are expected to increase as we move through 2017 and into 2018. Each sector is benefitting from a more targeted focus on value and risk.

Industrial motors on

The industrial sector stood above all others as the only one with year-over-year gains in transaction volumes. Up 20.7 percent at mid-year, the sector has been buoyed by the re-emergence of large portfolios.

Through the first half of 2017, $3.5 billion of portfolios larger than $250 million have closed, with another $12.5 billion of comparably-sized deals set to close by the end of the year.

Offshore activity remains elevated 

Foreign investors are flipping the script in U.S. real estate. Through the first half of the year, 47.2 percent of offshore acquisitions originated from Asian countries and seven of the top 10 foreign sources of capital are now Asian countries.

Despite overall offshore investment accounting for 11.4 percent of total transactions (compared to 16.4 percent in 2016) and concerns about capital controls, China is on pace to have a record year. As Asia's leading player, China tallied $3.6 billion of transactions in the first half, well on its way to surpass its 2015 peak of $4.9 billion.

Canada remains the largest source of offshore investment in the U.S. and continues to stay ahead of the curve on diversifying its holdings.

"Foreign investors continue to get more comfortable with U.S. real estate, and they're diversifying the profile of assets they are willing to pursue," said Geanakos. "This is especially true for Canadian firms, which have shown strong interest in multifamily and industrial assets."

Dry powder focuses on value add potential

Value add dry powder ticked up 58.9 percent since this time last year, adding another $13.8 billion to the market. It's on its way to reaching the record total from 2007. Value add fundraising continues to get more thematic with three of five $1 billion-plus funds closed this year focusing specifically on industrial, retail and multifamily.

Dry powder now sits at $254 billion globally, despite a slight decline in fundraising through the first half of the year. The late stages of the cycle have made it tougher for opportunistic fundraising, and that capital now comprises 40 percent of all dry powder globally. This capital remains focused on identifying opportunities.

JLL 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 2016 alone, JLL Capital Markets completed $145 billion in investment sale and debt and equity transactions globally. The firm's Capital Markets team comprises more than 2,000 specialists, operating all over the globe.

For more news, please visit The Investor, an online and mobile app news source providing real-time commercial real estate news to asset buyers and sellers around the world.

For more news, videos and research resources on JLL, please visit the firm's U.S. media center Web page: http://bit.ly/18P2tkv.

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the second quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of nearly 80,000. As of June 30, 2017, LaSalle Investment Management had $57.6 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.