JLL forecasts 55% fall in UK investment volumes this year

Global property services firm Jones Lang LaSalle (JLL) said on Tuesday that it expects direct investment in commercial real estate in the UK to total around £21 bn (EUR 24 bn) by the end of 2008. This represents a 55% drop on 2007 investment volumes, JLL said.

Julian Stocks, head of Capital Markets, England at JLL said: 'We are back at 2000 trading levels. Some prices have fallen up to 50% since the peak in 2007. The first few months of 2009 may see further price reductions as rents fall, however, later next year conditions could change. We are seeing signs of increased lending and the gap between property yields and interest rates is already proving attractive to some.'

Commercial property transaction volumes in the UK have reduced significantly across all sectors as the UK market continues to be affected by the ongoing financial crisis and poor market sentiment. Large lot size transactions, principally central London offices and shopping centres, remain limited due to the lack of availability of debt. Since Lehman's collapse and the events of October there have only been two significant shopping centre transactions in the UK and approximately £500 mln of central London office transactions.

'While it is difficult to put a number on 2009 volumes, we expect them to be broadly similar to 2008 but back-weighted,' Stocks said. 'The market should start functioning more normally towards the middle of next year as pricing adjusts to levels that tempts buyers back and particularly if debt becomes more available again.'

Going forward JLL expects the correction in UK prices combined with a weaker pound will make the market more attractive in relative terms to non-UK and global investors. Singapore and Japanese investors are already becoming active. JLL also forecast that investors will attempt to buy when they perceive the bottom of the market has been reached. 'Our evidence suggests some buyers are already targeting certain sectors looking for bargains.'

UK funds and REITs have been net sellers in 2008. 'A number of REITs may approach the capital markets to give them the fire power to take the opportunities that are likely to come in 2009.'

On Tuesday, PropertyEU reported that ING Real Estate was taking a landmark London property off the market because of lack of investor interest. To read the full article, open the link below