Global real estate investment activity improves

The CBRE Global Office Capital Value Index increased 12% year over year (y-o-y) in Q1 representing a strengthening of the positive trend evident for the past three quarters.

In the Americas, capital values increased by 9.5%, while the Asia Pacific region experienced strong growth of 18.9%. The EMEA region has essentially been flat over the past several quarters as capital values rose just 2.6% in Q1 2011 – slightly lower than its last reading. However, the most highly-regarded markets, such as the UK, France, and Germany, are witnessing relatively stronger increases in capital values for prime properties.

Global investment activity also continued to improve during Q1 2011, with investment volumes increasing by 22.9% y-o-y. The Americas experienced the most substantial increase of 77.2% y-o-y. Asia Pacific weathered devastating natural disasters in both Japan and New Zealand during Q1 2011 that hindered short-term quarterly investment volumes for the region as a whole and resulted in an increase of just 5.5% y-o-y.

EMEA continues to be affected by the European sovereign debt crisis, which is impeding much of the region’s recovery; as a result, transaction volumes increased by just 35.4% y-o-y. EMEA recorded the greatest transaction volumes at US$41.9billion in Q1 2011; however, this amount is below its quarterly average of $51.7 billion, which again reflects continued uncertainty and caution arising from the sovereign debt crisis.

CBRE Global Chief Economist Dr Raymond Torto said: "The German market in particular has seen rapid growth in property investment turnover, perhaps influenced by the fact that its economy has been one of the most robust in the region over the last year; both local and international investors have been active, with the retail sector attracting a high share of investment activity.

"The Central and Eastern Europe (CEE) region also stands out, with investors attracted to the higher yields on prime property compared with the main Western European markets. Investors remain very wary of taking short leases or secondary locations, so competition for prime assets in major cities is intense."

The limited number of active lenders has also hindered growth in investment activity in the EMEA region. The debt capital constraints, together with higher interest rates in the Eurozone, are restraining transaction levels. Nevertheless, EMEA’s sales volume grew 35.4% y-o-y in Q1 2011.

Dr Torto said: "Lenders have not forgotten the legacy of bad debts that remains from the global crisis period. Although some new players have entered the market, their interest is mainly in cherry-picking the best deals and providing senior debt for transactions involving high-quality, core property."

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