U.S. Top Spot for Global Real Estate Investors in Second Quarter

According to a new report from Real Capital Analytics, in the second quarter of 2011 the United States led the world in commercial-property trades.

August 8, 2011
By Suzann D. Silverman, Editor-in-Chief

How the nation’s credit downgrade may impact the commercial real estate market remains to be seen, but in the second quarter, at least, the United States led the world in commercial-property trades. According to a new report from Real Capital Analytics Inc., global transaction volume totaled $165.3 billion, and the United States brought in more than $30 billion of that, rising 147 percent over the same quarter of 2010, versus a global increase of 36 percent.

Overall, transactions in the Americas increased by 115 percent, reaching $55.6 billion, with growth occurring across property sectors and particularly marked by merger-and-acquisition deals in the United States and Canada. Brazil finished the first half on a positive note, but that was thanks to rampant sales in the first quarter, as its pace of property trades fell 32 percent in the second quarter. Prices across the Americas were stable to up, with a strong preference indicated for major markets, the study found. U.S. cap rates remained flat throughout the first half, with the exception of industrial and suburban office properties. Yields for prime assets were “significantly lower” than average in the United States, and stable to slightly lower across the Americas overall.

The Asia-Pacific region also fared well, with $67.2 billion in second-quarter sales, largely thanks to foreign attraction to Australian property markets, as well as strong performance in Singapore and South Korea. Hong Kong recovered but ended the year flat, while Japan saw a sharp drop in investor interest. Only India, Taiwan and New Zealand, however, seem to be losing investment momentum, the report noted. In China, the focus shifted from primary to secondary and tertiary markets, with interest in land moderating while sales of office and retail properties nearly doubled in the first half. Yields varied widely across the region, from Australia’s 8.3 percent in the second quarter to Hong Kong’s 3 percent average (with 36 significant assets trading at 3.5 percent or lower in the first half, the report noted).

The EMEA market stalled after six strong consecutive quarters, reaching $42.5 billion in significant property sales and a 10 percent growth rate over the second quarter of 2010. Germany and the Nordic countries turned in strong performance (with Germany seeing 65 percent year-over-year growth), while activity in the United Kingdom fell by 25 percent and France, 20 percent. Those decreases were largely due to secondary-market performance, as both London and Paris saw slower but still-positive growth. Eastern European was stable, with the exception of Russia, which experienced a 34 percent drop in activity. Middle Eastern performance was marked by decreases in Israel and the United Arab Emirates in the first half. Cap rates in Western Europe and the United Kingdom were 6.6 to 6.7 percent in the second quarter.

The report also tracked the top buyers from 2007 and found the least change in the Asia-Pacific region, where 82 of the top 100 buyers have purchased at least one property since January 2010. The United States similarly saw 81 of its top buyers still active, while Europe’s list found 60 formerly active buyers still in the mix. Among the top 20, Asia has seen the loss of just one buyer, Sino Land Co., while the United States has lost five (Lehman Brothers, GE Capital, Broadway Partners, Centro Properties and Dubai World) and Europe has seen 11 disappear, many of them either liquidated companies or those based in problem-ridden countries.