CHICAGO-Direct real estate investment rose 32% to $170.7 billion in the Americas in the first half of 2007, compared to the same period in 2006, according to a Jones Lang LaSalle mid-year capital flow report released recently. The company says that total investment reached $382 billion in the first half of the year, and is on track to hit $700 billion for all of 2007, despite higher interest rates and an expected slowdown of large portfolio trades.

Steve Collins, managing director of the company’s International Capital Group, tells that real estate still is enjoying a good chunk of investor interest from a capital shift from stocks and other securities early in the decade. “In spite of interest rates, people are still flocking to real estate as a safe haven,” he says. “It has dropped slightly; where you would have just had 15-20 offers on a class A or trophy asset, you still see 10-12, and you’re seeing quality buyers. Some of the value-added or high-octane money is standing on the sidelines until interest rates correct themselves, but people who see treasury investment as a good bet are also still willing to take the risk on solid return, and a potential upside, from real estate.’

Foreign capital is responsible for much of the boost in the US, which had $163 billion of the total Americas figures, Collins says. “It used to be, foreign capital were only looking at high-end properties in cities such as New York City or San Francisco, but they’re getting priced out of those areas. But US investing is still preferable to their home areas, so they’ll still invest here in cities such as Minneapolis, Richmond or Tampa,” he says. “Also, where the US investment had been mostly European, you’re staring to see more Mexican, Spanish and Korean investment.” European investment volumes rose 4% to 156.6 billion, with the UK, Germany and France accounting for two-thirds of that figure, and investment in Asia Pacific rose 12% to $55 billion, according to the JLL report.

Collins says the second half of 2007 may see a slower move of money, with investors being more selective, and he believes the portfolio fire sale may diminish, mirroring previous years of slower second halves. “You’re not going to seem the same volume as the first half,and I don’t think you’re going to continue to see the EOP-Blackstone-type deals, those types of trades are going to be more entry level than building trade level,” Collins says. “It’s getting harder to find groups to buy up large portfolios.”

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