Global deal volumes down 41% in H1 2008 - JLL

Global commercial property transaction volumes fell 41% in the first half of 2008 from the record levels in the same period the year before, according to a report from Jones Lang LaSalle.

Despite the lower volumes, the globalisation of real estate ownership continued in the first half of 2008 with cross-border investment activity continuing to account for almost 45% of total transaction volumes. The share of cross-border activity varied from region to region: from 25% to 30% in the Americas, but falling from 46% to 34% in Asia Pacific and from 66% to 58% in Europe.

Tony Horrell, CEO European Capital Markets at Jones Lang LaSalle commented: 'The fall in volumes was driven by global credit conditions which made debt both less available and more expensive. As a result, many purchasers are unwilling or unable to transact at prices seen in 2007, while vendors are unwilling to reduce expectations. This has caused a stand-off between buyers and sellers, particularly for large lot sizes.'

He said that highly leveraged investors - who were prolific buyers in recent years up to the summer of 2007 - have exited the market due to the combination of the general increase in the cost of debt and the collapse of the global CMBS market. Equity players are still active but are being more selective, and many are waiting for further declines in prices for assets before making acquisitions.

Horrell continued, 'It may well take another year before debt markets stabilise and in the meantime we are likely to see increased distressed selling. High growth markets or core markets perceived as oversold are likely to attract the most attention from buyers. With high velocity of pricing change comes opportunity for buyers. The range of opportunity will increase for those able to commit equity in the next 12 months.'

He said investors are seeking out markets with lower transparency but solid growth fundamentals. These include Latin America, with particular focus on Brazil, Central and Eastern Europe, and markets in Asia Pacific such as Vietnam. Jones Lang LaSalle expects investment volumes in 2008 to be at least 35% down on 2007 with risk on the downside, bearing in mind that the market was already showing weakness in the second half of 2007.

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