Future Looks Bright

The report shows a sharp uplift in total investment transaction activity during the first three quarters of this year. JLL finds that nearly $60 billion in investment trades were made, up 83 percent from the same period in 2009.

Get out your shades – sunny times are ahead. That’s according to Jones Lang LaSalle’s Fall U.S. Capital Markets Investment Outlook, which shows a sharp uplift in total investment transaction activity during the first three quarters of this year. JLL finds that nearly $60 billion in investment trades were made, up 83 percent from the same period in 2009.

JLL Capital Markets Americas president Jay Koster said the first three quarters of the year surpassed all of 2009’s total sales volume, adding that during the month of August alone, voluimes more than doubled the levels of 2009, reaching nearly $10 billion. That is particularly significant given that August typically represents a seasonally summer low.

However, Koster warned that the rally – while encouraging – is coming off of a low base, and that investors are primarily focused on core assets with stable and creditworthy cash-flow streams.

But is it too optimistic to say that this is a start in the right direction? Let’s look at the numbers: During the third quarter, overall investment sales volume for the four main property types totaled $26 billion – the highest quarterly total since third quarter 2008. Moreover, according to JLL, the current transaction pace is similar to the sustainable level seen in the second half of 2002, with nearly identical third-quarter volumes and projected fourth-quarter trading levels. This is an instance where it’s good to have lower trading volumes than, say, the heights of 2005 to 2007, which as we now know brought us to an unprecedented – and unsustainable – level.

In terms of specific investment, it’s surprising to see that retail experienced the greatest surge during the third quarter, up 78 percent. Second, and less surprising, was the apartment sector, which saw an increase of 68 percent. For the year through the third quarter, the apartment sector is up a robust 98 percent, followed by office at 84 percent, retail at 83 percent and industrial with a 59 percent year-to-date increase.

So slide on those shades – but keep a sense of perspective. As we’ve seen, an overinflated sense of the market can more than likely backfire.