Global Q3 Investment Strength Hits $69B

CHICAGO-Investment in Asia and the Americas is up, and down in Europe and the Middle East, but overall global investment continued to show strength in the third quarter, according to a Jones Lang LaSalle Q3 Global Capital Flows report. Volume has hit about $202 billion so far this year, much higher than the $139 billion transacted for the same period in 2009.

As in the United States, global capital is still fighting over quality assets, resulting in yield compression and a substantial rise in values across many of the leading office markets, from London to Washington DC to Shanghai, according to JLL. The Chicago-based firm expects volumes to reach up to $290 billion for the year, representing an almost 40% increase on 2009’s total figure. “Further growth in volumes is expected in 2011, with cash-rich investors widening their geographic search, pushing into value-added opportunities and eventually into secondary stock,” said Arthur de Haast, head of the international capital group at JLL.

Steve Collins, head of the group in the Americas, tells GlobeSt.com that this secondary push is already happening in the United States. “Money has already been banging around New York City and Washington DC, as global investors show confidence at the transparency in the US,” he says.

“We recently met with 18 different global banks who are looking to lend, and they wanted to continue just in the core cities,” Collins says. “We told them, ‘Your math doesn’t work.” If you want a 6% return and you’re only leveraging 50% and trying to get a 7% yield, it doesn’t exist in NYC or DC. You need to look at the secondary cities, such as Chicago or Atlanta.” He says his firm expects US transaction volumes to almost double this year from 2009, to up to $90 billion by the end of 2010.

The Asia Pacific region showed a 12% increase in investment volume to $18 billion in the third quarter, though that region also showed an export figure of $1.1 billion into the European market. However, even with this boost, the Europe, Middle East and Africa (EMEA) region witnessed a 12% decline in volumes to $27 billion. A summer-month lull, a lack of core product and ongoing concerns around sovereign debt on some countries restrained transactions in the past quarter, with volumes down significantly in Spain and Italy, according to JLL researchers.

Prime asset locations in Europe, however, continue to show strength, says Damian Corbett, head of offices capital markets in England. “Transaction volumes in central London alone are likely to hit more than $15 billion, which is a 20% increase on 2009. Interest in London is coming from across the world, with investors from more than 45 countries actively bidding,” Corbett says.

Volumes are up 12% in the Americas, led by core US cities and the skyrocketing growth market of Brazil. “Volumes have more than tripled through the first three quarters in Brazil, as both cross-border and domestic investors are eager to capitalize on the country’s robust economic progress,” Collins says.