European commercial real estate investment volumes for 2013 look set to match the performance of the last 12 months, Jones Lang LaSalle has predicted.
The global property adviser said that an 'exceptional' fourth quarter pushed global real estate investment volumes to $436 bn (€330 bn) in 2012. The global performance marked a slight increase on 2011’s $435 bn and a 36% increase on 2010.
JLL recorded $141 bn of deals in the fourth quarter globally compared to $100 bn for the third quarter and $119 bn for the fourth quarter of 2011.
The firm said direct real estate ownership was showing its attractiveness in a low-yield, high-liquidity world with below-trend economic growth prospects for 2013.
David Green-Morgan, global capital markets research director at JLL, said, 'The greater allocations to real estate from a number of institutional and private equity groups are starting to have a real impact on the global real estate investment market.'
'The threat of higher capital gains taxes in the US triggered a wave of year-end transactions, but the underlying factor is the attraction of real estate in a low-yield, high-liquidity environment. Despite the improvement in values over the last three years globally, we are still 15 to 20% below the market peak. There remains a great deal of upside potential, particularly in secondary markets which have remained subdued since the financial crisis but are starting to attract investor interest given their more attractive yields.'
During 2012 Europe beat expectations by matching 2011 in euro terms but was 8% down in US dollar terms partly due to a weak euro currency. The UK remained the most active market in 2012 and there was increased activity in Q4 on the continent with France, Germany and the Nordics seeing stronger ends to the year.
The US saw the largest jump in activity. The 'fiscal cliff' and pent-up demand pushed US volumes 51% higher quarter-on-quarter, JLL said, as vendors fretted over capital gains tax increases and the need to allocate capital. The performance was 34% up on 4Q 2011 and 11% higher year-on-year.
On the back of this better-than-expected end to 2012, JLL has estimated full-year 2013 volumes will be between $450-500 bn, with the best performances in the final months following a similar pattern to 2011 and 2012.
Arthur de Haast, head of the International Capital Group at JLL, said: 'The surge in the final quarter of the year demonstrates once again that real estate markets are well through the recovery phase of the cycle and are now supporting year-on-year increases in transactional volumes. Based on this evidence we anticipate that 2013 will be another one of growth with global volumes set to be between $450-500 bn.'