GLOBAL - The recovery in global real estate transactions has levelled off, driven by a constrained availability of prime properties in Europe, according to Jones Lang LaSalle (JLL).

The latest research from the real estate agency shows direct commercial property investment totalled $69bn (€49.2bn) in the third quarter, a similar volume to that seen during the previous three-month period.

It means investment volumes in the first nine months of 2010 have reached $202bn, higher than the $139bn transacted over the same period last year, and JLL expects volumes for the full year to reach $280-290bn.

But the findings also suggest deal volumes have reached a plateau, and JLL attributes this to a lack of prime assets coming to the market in Europe.

Arthur de Haast, head of the international capital group (ICG) at JLL, said: "A significant weight of equity capital is targeting prime assets across all sectors, but a scarcity of prime product for sale is constraining investment volumes.

"Product shortages are also resulting in yield compression and substantial rises in prime capital values across many of the world's leading office markets, from London to Washington DC to Shanghai."

He added: "Further growth in volumes is anticipated in 2011, with cash-rich investors widening their geographic search, pushing into value-added opportunities and eventually into secondary stock."

Asia Pacific actually saw a 12% quarter-on-quarter increase in investment volumes in the third quarter ($18bn), with notable quarterly rises in Singapore, Australia, China and Malaysia.

Stuart Crow, head of capital markets in Asia Pacific, said: "The Asia Pacific investment market is benefiting from optimistic business sentiment, resurging investor confidence and strong economic fundamentals.

"We anticipate transaction volumes to show 15-25% growth on 2009, reaching the $77bn mark by year-end."

Europe, Middle East and Africa saw a 12% decline in volumes on the second quarter ($27bn), but volumes for the entire year are still expected to be 30% higher than they were in 2009.

A lull during the summer months, a lack of core product and ongoing concerns around sovereign debt in some countries have restrained transaction volumes in the past quarter, JLL said.

Meanwhile, capital market momentum continued to build in the Americas, where volumes rose by 12% in the third quarter.

With a significant pick-up in activity, particularly in gateway cities, US volumes have risen by a further 24% in the third quarter and are more than 50% higher than a year ago.

Brazil is the region's most compelling growth market, and volumes have more than tripled through the first three quarters of 2010 as both cross-border and domestic investors are eager to capitalise on the country's robust economic progress.

Steve Collins, head of the ICG in the Americas, said: "The strength of global interest in investment in the Americas is strengthening as investors are drawn both to emerging markets like Brazil and to the core coastal markets of New York and Washington, DC."
 

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