Commercial Real Estate Expected to Enjoy a Boost in 2010

According to a report released by real estate consultants Jones Lang LaSalle, direct commercial real estate transactions volumes are poised to receive quite a boost in many parts of the world in 2010. In fact, the experts at Jones Lane LaSalle predict that volumes will increase by 30% in the Middle East, Europe and North Africa.

These predictions are being made after the market experienced better than expected activity during the first quarter, a time during which the market is traditionally quiet. At the same time, Jones Lange LaSalle cautions that there was also a 75% increase during the first quarter of 2008, at which time volumes managed to reach €20 billion.

When comparing the first quarter of 2010 to the last quarter of 2009, transactions are actually down by 15%. Nonetheless, analysts are confident the market is in a good position for the remainder of the year. This is particularly true in the UK, where the transaction volume of €7.8 billion accounted for more than one-third of all transactions and remained consistent with figures from the previous quarter. Three other countries, France, Germany and Sweden, followed closely behind, with each experiencing an increase in activity when compared to the previous year.

“The first quarter of the year is typically one of the slowest quarters; investors do not have the urgency to press on and close deals as they do toward the end of the year. Typically the first quarter is some 20 to 30% below the fourth quarter, so we do not read a 15% decrease as a sign of a slowing market,” said Richard Bloxam, who is the Director of EMEA Capital Markets with Jones Lang LaSalle, in a Property Wire article. “We expect investment activity to increase throughout the year. Already a number of transactions over €100 million and portfolio deals are under offer in the market. We estimate that direct commercial European real estate transaction volumes will reach at least €90 billion for the full year. This will be around 30% higher than 2009.”

Nigel Roberts, who is the Chairman of EMEA Research with Jones Lang LaSalle agrees, saying there is a growing amount of investor interest in obtaining quality real estate.

“This has clearly been demonstrated by movement in prime office yields when compressed in the majority of the European markets in the first quarter of 2010,” said Roberts. “London prime yields moved in by 50 basis points and continental European markets between 10 to 50 basis points with only a handful of markets remaining stable. Whilst economic recovery still remains fragile, business confidence is generally rising and with improved credit conditions the demand for real estate from core investors is driving down yields. In the short term interest rates sill offer positive cash flow opportunities for leveraged buyers but longer term investors will be looking for improving fundamentals translating into stronger rental markets.”

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