Cross-Border Real Estate Investment Rebounds
Sorohan, Mike, Mortgage Banking
Global cross-border investment increased by 60 percent year over-year and accounted for 40 percent of all direct commercial real estate (CRE) investments in 2010, according to Chicago-based Jones Lang LaSalle's (JLL'S) global capital markets group.
JLL said the proportion of investment, totaling $130 billion (93.7 billion euros) is equal to the boom years of 2006-2007.
"During the downturn, domestic trading held up better globally than cross-border activity as investors focused their attention on familiar markets," said Arthur de Haast, head of the JLL International Capital Group. "In 2010, however, equity-rich investors led the flight to quality assets in core, mature and transparent markets, which has supported the resurgence in cross-border investment volumes over riskier secondary and tertiary domestic markets," added de Haast.
JLL reported inter-regional volumes reached $82 billion in 2010, equal to 2004, which constituted one-fourth of overall global volumes. At its peak in 2007, inter-regional volumes were nearly triple 2010 volumes at $243 billion, and represented more than one-third of overall global volumes.
De Haast said the pick-up in inter-regional activity has proceeded in step with the overall market, suggesting that a significant number of investors are willing to look not only outside of their domestic markets, but outside of their region.
"We expect domestic and cross-border transaction growth to continue in 2011 as investors move up the risk curve," de Haast said.
Inter-regional investment volumes in the Americas doubled between 2009 and 2010 from $14 billion in 2009 to $31 billion in 2010. JLL said this strong bounce back was not only driven by the domestic market, but was led by U.S. interregional activity, as foreign investors and purchasers took advantage of a pick-up in activity in the core markets to trade. Inter-regional purchasers transacted $5.6 billion in 2009 and $13.37 billion in 2010; inter-regional vendors acted on $7.79 billion in 2009 and $16.77 billion in 2010.
"Foreign investment re-entered the market aggressively in the back half of 2010, and it began targeting just the top two trophy markets: New York and Washington, D.C.," said Steve Collins, managing director of the Americas for JLL's International Capital Group. "Now, those gateway cities are almost tapped out and some foreign investors are paying as much as $700 per square feet for prime real estate properties."
JLL reported in 2010 cross-border volumes in Europe and the middle East reached $72 billion of a total market of $136 billion--a 53 percent increase on 2009, when cross border accounted for $47 billion of $97 billion total European and middle Eastern volumes.
"Today, the demand is increasing, but there isn't enough quality product to buy in the top two core U. …