Foreign Investment

Global Recovery Underway

Continued economic expansion spurs international investment.

The international commercial real estate market is still recovering from the global recession that sent property values into a tailspin, stalled the flow of capital, and cut investment sales activity off at the knees. In the wake of that crisis, property sales plummeted in markets ranging from Ireland to Istanbul.

Yet, even though transaction volume is still well off the peak levels that were occurring in 2007, buyers are returning as financing improves and more economies around the globe show signs of stabilizing.

“In general, global investment activity is trending up, and it is certainly trending up faster in some markets as opposed to others,” says Steve Collins, managing partner for the Americas International Capital Group at Jones Lang LaSalle in Washington, D.C.

During the first half of 2010, the global volume of direct commercial real estate investment totaled nearly $131 billion –- a 43 percent increase compared with the $75 billion in properties that traded hands during the first half of 2009, according to a JLL midyear market report. Although 2Q10 demand wavered due to jitters created by the European debt crisis, JLL is still predicting that this year’s transaction totals will grow to $300 billion.

As a whole, the global economy is continuing to expand, according to the International Monetary Fund, which is predicting 4.6 percent growth in 2010. This marks a big improvement over the 0.6 percent contraction that occurred in 2009, as well as the 3 percent expansion in 2008.

Despite that positive forecast, the economic recovery still remains patchy at best. For example, Asia Pacific clearly has been a leader. China, for example, saw its gross domestic product improve 10.3 percent during 2Q10 compared to a 0.7 percent rise in the U.S. gross domestic product.

“Early in 2010, we saw a rebound in the two largest economies –- China and India -– due to the high population and the increase in manufacturing,” says Kamil Homsi, CCIM, MRICS, president of Global Realty Capital with offices in New York and Dubai. China and India also had the added advantage of not being highly leveraged, which has dragged down recovery in other countries across Europe such as Germany, France, and Spain, he adds.

Beth Mattson-Teig

Beth Mattson-Teig is a business writer based in Minneapolis.