EUROPE - Europe was the major target of global capital flows for real estate transactions in 2007, capturing 40% of the total $339bn (€215bn) in real estate transactions last year, according to data released by Real Capital Analytics (RCA).
Of this total, $177bn went toward continental transactions, in which both the buyer and seller were from the same continent.
But there are indications global capital flows are changing dramatically, however, as investors contend with the current business climate.
At least one-third of all property acquisitions globally involved either a foreign buyer or foreign capital partner, as overseas investors accounted for between 25-35% of sales volumes for most sectors, including office, industrial, hotel, and developable land.
In the retail sector, overseas investors amounted for 44% of acquisitions, although the bulk of these were continental Europe transactions.
While Europe accounts for 75% of all continental transactions and 40% of European property acquisitions involved investors from another European country, this contrasts with the situation in North America, where continental investment is a relatively insignificant part of the market. USA-Canada cross-border investment amounted for only $6bn, and USA-Mexico cross-border investment was $4bn.
That said, continental capital flows are on the rise in Asia, as 80% of cross-border deals involved acquisitions in China.
In 2007, 58 cities posted at least $1bn of acquisitions by cross-border investors, as London, Paris, the New York metropolitan area, and Singapore captured the most cross-border capital. Foreign buyers also accounted for more than 80% of total sales in Prague, Warsaw, Munich and Chongqing.
It is interesting to view 2007's trends through the lens of 2008's emerging results as transaction volumes have fallen dramatically so far in 2008.
RCA tracked some $80bn in sales in the first two months of the year, representing a 50% drop against the same period in 2007, and the biggest declines were registered in Germany, the USA, Canada, and Australia, as all countries saw a 70% business decline.
This took place at the same time as sales in Asia doubled, and overall sales in the BRIC countries (Brazil, Russia, India and China) have grown significantly over the same period last year.
"As first quarter data continues to be tallied, it appears that Europe or Asia will lead in property sales," noted the report. "Acquisitions in North America will fall short of both in a stunning reversal of trends. No matter which continent leads, it is evident that global capital flows for property are rapidly changing."