Global Investment Drops from Fourth Quarter

LONDON-Global investors are continuing to hold movement in wait for better fundamentals, according to a report by JLL’s Capital Markets Research division. The company’s first quarter data shows global direct commercial real estate investment volumes totaled just under $90 billion in Q1 2011, down 20% from the fourth quarter.

Compared to the start of 2010, all major global markets have seen an increase in volumes, particularly in Germany, Poland, Russia and the United Kingdom, according to JLL. However, investors are still being careful with risk, and are holding out to see if fundamentals will get better.

Steve Collins, a managing director at JLL, tells GlobeSt.com that the slower movement in the first quarter is typical, as investors scrambled in Q4 2011 to get deals completed before the end of the year. “But you’ve still got coffers full of money all over the globe, itching to get into the real estate markets. They can’t let the money sit there and just earn less than 1%, you’ve got groups such as the Chinese government that are saying they want to invest their cash into hard assets,” he says.

Prices are rising on both ends of the barbell, in core markets and for distressed properties, confusing investors even more about when to buy. “On one hand you’ve got distressed loan sales that were going for 25 to 30 cents on the dollar now going for twice that,” Collins says. “Then on the other hand, you’ve got investors still calling and looking for high yields and low prices in core markets such as Washington, DC or New York City. It’s not going to happen.”

Mirroring the United States, the global market is still very fractured, with pockets of quality available here and there. Collins uses the comparison of London, which had low cap rates that rose up when the market tanked, and now the West End is leading the city’s charge, he says.

There’s also the variables such as Japan’s earthquake, tsunami and nuclear crisis, or the Middle East turmoil, though Collins says with today’s interconnectivity, the hiccups have gotten smaller for investing. “The dips are now closer to the peaks, you’ve got shorter cycles in this information age,” he says.

According to JLL, there will be roughly $300 billion more in direct commercial real estate transaction volumes for the rest of the year. Collins says he sees improvement. “I think we’ll see more lenders lighten up on underwriting criteria, and more people willing to take the risks, and owners getting more comfortable with where pricing is now at today,” he says.