Americas Cap Markets Gain More Momentum

NEW YORK CITY-The commercial real estate recovery is picking up steam in the Americas, Cushman & Wakefield and Jones Lang LaSalle’s New York Capital Markets Group say in two separate reports. That has favorable implications particularly for the investment sales market in this region, according to JLL’s Fourth Quarter Market Overview released this week.

“In nearly every market around the world, commercial real estate has seen a remarkable turnaround in transaction volume since the lows of 2009,” JLL vice chairman Richard Baxter says in a release. “In the US alone in 2010, transactions from all property types—led by office and multifamily—surged 122% over the year before. On the whole, 2011 global investment sales volumes are expected to increase by an additional 20% to 25%, with the Americas anticipated to show the largest increase.” The report anticipates a broadening of the market this year, in terms of both geography and asset quality.

Further, JLL’s report notes that the CMBS market is also “showing new signs of life.” The report cites a rise in larger bond issuances entering the pipeline; in an interview earlier this month, CEO John D’Amico of the CRE Finance Council told GlobeSt.com, “Based on announcements that have been made—and you never know until they go out and price—we’ll see $9 billion in the first quarter of ‘11.”

In the realm of fundamentals, JLL’s report cites both trouble spots, including lack of job growth and an “anemic” housing market, and encouraging signs such as a gain in retail sales and a decline in new jobless claims in the final months of ’10. Similarly, C&W’s Americas Outlook report picks up on the decrease in jobless claims from 490,000 in August ’10 to 410,000 in December of the past year. “Generally, a drop below 400,000 is consistent with acceleration in employment growth, and the economy is just about there,” writes Ken McCarthy, senior economist and senior managing director of research at C&W, in the Americas report.

As a result, according to C&W, the US economy appears to be near a “tipping point” in employment growth, moving from “moderate” growth to “strong” growth. “Monthly average employment growth is projected to increase from about 92,000 jobs per month in the final quarter of ‘10 to slightly more than 300,000 per month in the fourth quarter of ’11,” McCarthy writes. By year’s end, he writes, “the US economy should be adding jobs at an annual rate of more than 3.5 million. That would be the strongest employment growth since the final quarter of 1997.”

For the Americas a whole, McCarthy writes, “The recovery is here and is likely to get stronger” as the year progresses. as 2011 progresses. Although the entire region will benefit from stronger growth in the US, but “all the major countries in the Americas will be in full-fledged economic expansions,” which can only help conditions in real estate markets.”

“Healthy employment growth will contribute to declining vacancy in most markets, on average and lead to an upturn in asking rents sometime in the next 12 to 18 months,” writes McCarthy. “We are already seeing higher rents in several markets. The tipping point, if it isn’t here yet, is very close.”