Global cross border property transactions rose 60 percent year-on-year to US$130 billion and accounted for 40 percent of all direct commercial real estate investments worth US$318 billion in 2010, according to global real estate services firm Jones Lang LaSalle (JLL).
“During the downturn, domestic trading held up better globally than cross-border activity, as investors focused their attention on familiar markets,” said Arthur de Haast, Head of International Capital Group at JLL.
“In 2010 however, equity-rich investors led the flight to quality assets in core, mature and transparent markets, which has supported the resurgence in cross-border investment volumes over riskier secondary and tertiary domestic markets. We expect domestic and cross-border transaction growth to continue in 2011 as investors move up the risk curve.”
Inter-regional volumes for 2004 and 2010 were both at the US$82 billion level and made up a quarter of all global volumes. The trend peaked at one third of total global volumes in 2007 at US$243 billion and approximately tripled the cross-border volumes of both 2004 and 2010. The pick-up in inter-regional activity has proceeded in step with the overall market, suggesting that a number of investors are willing to look not only outside of their domestic markets but also, outside of their region.
From 2009 to 2010, inter-regional investment in the Americas doubled from US$14 billion to US$31 billion. This was led by US inter-regional activity, as foreign investors and purchasers took advantage of recovered activity in the core markets to trade.
“Foreign investment re-entered the market aggressively in the back-half of 2010 and it began targeting just the top two trophy markets: New York and Washington, D.C. Now, those gateway cities are almost tapped out and some foreign investors are paying as much as $700 per square foot for prime real estate properties. Today, the demand is increasing, but there isn’t enough quality product to buy in the top two core U.S. markets, so interest will extend to five markets in the next six months and into eight to 10 markets throughout the country by the end of the year,” said Steve Collins, Managing Director for JLL America International Capital Group.
Asia Pacific cross-border transactions peaked at 47 percent (US$57 billion) in 2007, compared to 26 percent (US$17 billion) in 2009 and 32 percent (US$27 billion) in 2010.
Alistair Meadows, Director of JLL’s International Capital Group, Asia Pacific said, “Investors’ renewed desire to look at international real estate opportunities as we emerge out of the global financial crisis is not surprising, given the improved market fundamentals; however, the longer term trend toward cross-border activity is a key part of Asia Pacific’s emergence as a major source of and destination for global real estate capital.”