Direct RE investment to drop 30% in 2008, JLL predicts

Global direct real estate investment is expected to fall over 30% in 2008 from the record level set in 2007, Jones Lang Lasalle has predicted in its latest report on global real estate capital. Investment volumes last year rose 8% to $759 bn (EUR 480 bn), but in 2008 the Americas and Europe are expect to see a material decline in full-year volumes while a more resilient Asian market is nonetheless not expected to match the volumes of 2007.

'Reduced debt availability and investor confidence are likely to be here to stay for much of the first half of 2008 as the impact of the debt squeeze continues to ripple through the markets, and central bankers and financiers work to stabilise and stimulate the debt markets,' Tony Horrell, head of European capital markets at JLL, said in a statement. 'The situation is being exacerbated by unease about the global economy, in particular about major economies such as the US, the UK and Japan.'

Jones Lang Lasalle cites a number of factors that will constrain volumes in 2008; buyers and sellers adopting a 'wait and see' strategy; prices having peaked in many major markets in 2007; a misalignment between buyers' and seller' price expectations; reduced debt availability; reduced willingness and capacity to transact large lot sizes; a narrower spectrum of investors and more exacting due diligence which lengthens the transaction process.

Nonetheless, Jones Lang Lasalle does not expect investors to engage in a strategic and planned withdrawal of capital from real estate and Horrell said forecasts for 2008 were actually positive. 'The long-term trends in real estate, such as the growing credibility of real estate as an investible asset class, improving transparency, urbanisation, and restricted supply, continue to be positive