CHICAGO-Jones Lang LaSalle’s US Mid-Year Capital Markets Bulletin reflects a 90% transaction drop in the first half of 2009 from the market’s peak. Transaction activity plunged to just $16 billion in the first half of 2009, down 80% as compared to nearly $80 million during that same period last year. The first half of 2009 was down 93% from the $231 billion seen in that period in 2007, when the market peaked.

The report also looks forward to the second half of the year with a prediction that REIT capital raises and Term Asset-Backed Securities Loan Facility participation could be the first signs of liquidity’s return to the markets in the coming months. However, credit is still tight and liquidity sparse, and markets won’t recover until banks begin to lend again, according to Steve Collins, managing director of JLL’s International Capital Group.

“A significant trend we’re focused on is the lack of credit and how that’s affecting the whole market,” Collins tells “Banks are in a practice of delay and pray. We have money coming due and until banks start to lend again, it’s going to be a hard time.”

JLL’s bulletin says the financial public policy support has halted the economic decline. However, at the same time, the firm reports that any recovery in the commercial real estate capital markets has been put off, as banks continue extending maturities for borrowers, avoiding foreclosure. As a result, the firm predicts that credit markets will remain frozen until at least the middle of next year.

“People are saying when’s the other shoe going to drop, and that’s the shoe,” Collins says. “Banks can’t lend money until they get their balance sheets cleaned up. In the old days, it was simple to get a $100 million loan, but now you have to get four different approvals and it’s hard.”

Another trend JLL’s mid-year bulletin highlighted was the build of foreign investor interest in US assets. Collins says he believes international buyers will play a large role in US commercial real estate investment through the end of this year and the first half of next year.

“The international capital has been sitting on the sidelines, watching from afar and waiting, but now you’re starting to see international investment bubble up in the States,” Collins says.”Foreign capital didn’t get burned as much, so now they’re flush with capital and have more borrowing power because they never really went overboard before. Now with the value of properties going down and they’re sitting on a lot of capital, they look at real estate in the US and we’re seeing their attitudes of why not buy now, because I might not see a good deal like this again.”

Just as activity appears to be increasing within international buyers, so too does JLL see an uptick in the willingness of foreign banks to lend money. “You’re seeing people looking at assets and you’re seeing a flight to quality, where buildings that are more leased with low rollover are more attractive,” Collins says. “In terms of recovery, I think we’re going to see things be more stabilized toward the third or fourth quarter next year and it’s going to be more clear then.”

Collins highlights the rebound of some markets internationally, namely in Australia and London, as well as central business districts domestically. “In a lot of the CBD markets, you’re seeing good value being had and realized,” Collins says. “Investors are coming to take advantage of that, with cash being king.”

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