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Investment in real estate up despite economic concerns, third quarter figures show

Volumes totalled US$99 billion according to the latest figures from Jones Lang LaSalle. In the first nine months of 2011, investment activity increased by 43% with total transaction volumes amounting to US$297 billion, compared to US$208 billion in the same period last year.

Despite heightened economic and sovereign debt concerns, European transaction volumes have held up well, with a total of $US41 billion in the third quarter, an increase of 14% on the last quarter and a 38% rise on the third quarter 2010.
The UK, the largest market in Europe, saw a marked improvement in the third quarter 2011, in part due to deal completions delayed from the second quarter. Germany, France, Scandinavia, Poland and Russia all continue to attract strong investor interest, with safe haven status and relative GDP growth considerations prevalent.

In Asia Pacific, transaction volumes amounted to $US20 billion in the third quarter. This represents an 8% rise on the previous quarter and a 3% increase on the third quarter 2010. The deal volume for China’s direct commercial property investments rose to approximately $US2.8 billion, up 13% on last year. Japan the largest Asian market, saw volumes rise to over $US4.7 billion, in line with the same quarter in 2010, as the markets recovered following the tsunami and earthquake earlier in the year.

The Americas saw a slowdown in the third quarter with volumes down 22% compared with what was a very strong second quarter. Investment reached $US38 billion, up 60% on the same period last year.
‘Real estate fundamentals remain relatively strong and the asset class has gained favour compared to equities and bonds,’ said Arthur de Haast, head of the International Capital Group at Jones Lang LaSalle.

‘However, debt finance is harder to come by than earlier in the year, and the expected growth in interest in secondary product has stalled as investors take refuge in core, well let product in specific markets. The market remains very much sentiment-driven and the mood is cautious, resulting in delays in closing deals and volatility in transaction volumes quarter on quarter,’ he explained.

‘In the context of the sovereign debt crisis and wider economic growth concerns, we feel that there is a possible downside of up to 10% against our original estimated volumes for 2011of $US440 billion,’ he added.