UK - Jones Lang LaSalle has predicted direct investment in UK commercial real estate will have dropped by approximately 55% year-on-year by the end of 2008, to stand at around £21bn (€24bn).
The ongoing financial crisis, lack of available finance and deteriorating market sentiment has caused commercial property transactions and prices in the UK to decline significantly across all sectors, according to Jones Lang LaSalle.
The firm based its predictions on research carried out by its investment team and information from Property Data, suppliers of independent market data in commercial investment and development.
Julian Stocks, head of capital markets at Jones Lang LaSalle, 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," he added.
Large lot size transactions like London office block and shopping centres have been limited because of the lack of availability of debt so there have only been two large shopping centre transactions and around £500m (€571m) of central London office deals since since October 2008.
Stocks said he expects transaction volumes for 2009 to be similar to those in 2008 while the market will return to some normality towards the middle of the year.
"While it is difficult to put a number on 2009 volumes, we expect them to be broadly similar to 2008 but back-weighted. 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," he said.
Jones Lang LaSalle said it expected investors to start buying when they believe the market has reached the bottom, and said it has already seen investors targeting certain sectors for bargains.
"The types could be loosely grouped as opportunity funds, private overseas investors or UK high-net-worth individuals," said Stocks.
The company's report, entitled Overseas Investors: influence on the rise 2008, predicted international investors will be attracted to the UK commercial property market because of the weaker sterling and correction of UK prices, and claimed Singapore and Japanese investors were already showing interest.
The "movement of the yen" is making the UK more attractive to Japanese investors, according to Stocks.
Canadian pension funds, German open and closed funds, sovereign wealth funds (SWFs) and US and Middle East investors are also looking to place their equity into the UK market, said the report.
In the nine months to October 2009, overseas investors were responsible for 40% of all activity and made net investments of approximately £6bn (€6.87bn). German investors were the biggest net buyers, with a net investment of £1.6bn, followed by Middle Eastern investors with £1.4bn.
Jones Lang LaSalle believes some Real Estate Investment Trusts (REITs) might approach the capital markets to make it easier for them to seize opportunities in 2009.