Report predicts steady recovery in 2012 commercial real estate
HAPPY DAYS: With a strong pipeline of deals, transaction volumes of global investment in 2012 are expected to match 2011 levels, says Jones Lang LaSalle report
The world‘s major commercial real estate markets have been in recovery mode since the crisis of 2008/2009, with 2011 having shown the strongest evidence of an upswing so far. As we move through 2012 nonetheless, first quarter market data suggests a slowing in forward momentum, with investment and leasing volumes down by about one-fifth compared to a year ago, according to Jones Lang LaSalle report on Second Quarter 2012 Global Market Perspective.
“We believe this is a lagged market response to the escalation of the euro crisis during the second half of 2011 and, as such, it is likely to be a temporary slowdown. Given the more positive outlook for the global economy, the significant weight of capital targeting commercial real estate and the strong pipeline of deals, we fully expect the global real estate markets to resume their steady, measured recovery during the remainder of 2012,” the report said.
This is despite the global investment volumes down 21 per cent year- on-year, owing to a lack of product in core markets and constraints on debt finance. But with a strong pipeline of deals, transaction volumes for full-year 2012 are expected to match 2011 levels, the Jones Lang LaSalle report revealed.
On the other hand, overall leasing activity has slowed, a delayed response to corporate occupier caution. Q1 2012 volumes are down 15-25 per cent year-on-year. Gross leasing volumes are expected to be slightly lower in 2012 compared to 2011.
Sectors that continue to grow are technology, energy and commodity-rich markets that are registering robust corporate occupier demand. Domestic corporations and outsourcing (BPO) are driving demand in many emerging markets. The financial sector remains subdued however.
The Americas region still offers the greatest potential to outperform in 2012. In the US, the most sought-after property is the rental apartment market which remains strong. New York is the second top city for real estate capital Matthiin
Q1 2012, after London and followed by Tokyo.
In terms of the retail market, international retailers are targeting emerging markets, with a strong focus on Greater China with retailers moving deep into China‘s secondary and tertiary cities. In Europe, the retailers are no less sanguine with rents in prime retail markets rising at their fastest rate in over a year.
Meanwhile, in the hospitality industry, hotel operators are stepping up acquisitions in Q1 2012.