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News Release

MIPIM, Cannes

Jones Lang LaSalle Predicts Uneven Recovery for EMEA Real Estate Investment Markets in 2010, with Growth in Overall Volumes

New European Capital Markets Bulletin Released at MIPIM with 2010 Outlook


MIPIM, Cannes, 15th March 2010 – Jones Lang LaSalle confirmed today that it expects direct investment in commercial real estate in Europe in 2010 to increase by 20 to 30 percent on 2009 levels, which stood at €69.2bn. 
 
According to Jones Lang LaSalle’s latest European Capital Markets Bulletin, just released, €24.6 billion of commercial real estate was transacted in Q4 2009 in the region, more than double the €11.6 billion in Q1 2009 and 50% more than the turnover in Q4 2008. A strong final quarter of the year is not unusual as investors try to place capital before year end, although this had not been seen for the last two years when volumes declined for seven consecutive quarters between Q2 2007 and Q1 2009. 
 
Chris Staveley, Director EMEA Capital Markets at Jones Lang LaSalle said: “The growth we are expecting to see this year will be fuelled by an improvement in the availability of debt, the recognition that pricing has probably hit or even passed its floor, slightly more appetite for risk taking and more assets coming to the market.”
 
He continued: “If in 2010, the market does reach these levels it would still be a low number in historical terms - roughly 2002 levels. The reason for volumes recording a gradual rather than abrupt recovery will, we think, be the continued focus by investors on a narrow band of core, income producing prime assets in all but a minority of cases. A weak economic outlook sets the backdrop for difficult occupier markets almost everywhere, and despite some markets seeing some recovery in prime rents, caution and risk aversion will remain key themes in the market in 2010 for investors and occupiers alike.” 
 
Compressing yields in some markets combined with rents which are approaching the bottom of the market in others, resulted in upward movements in Jones Lang LaSalle’s Capital Value Indices for all sectors in the final quarter of 2009. The European Office Index moved up 1.1% on the quarter, high street retail +4.8% and distribution warehousing +1.0%. Our expectation is for prime rents to remain under pressure in 2010 (although some markets will buck the trend), but broader yield compression means prime capital values will record small but positive year-on-year growth.
 
We expect a continued improvement in deal making and the availability of debt which will translate into more large deals in 2010.  Deals over €50 million have seen a steady increase since Q1 2009, driven higher in Q3 by two deals over the €1 billion mark. Of the almost 100 deals over €100 million completed in 2009 almost 75 were closed in the second half of the year and 40 in the final quarter. The second half of the year also saw the return of the €1 billion plus deal with two significant transactions: the sale and leaseback of a portfolio of bank branches in Spain and the sale of a 50% share in the Broadgate Estate in the UK.
 
Total cross border investment now makes up less than 50% of total transaction activity down from a high of 63% in 2007.  The decline in cross border investment masked a concentration of international capital in a small number of markets. The UK, which attracted over 50% of all inward cross border investment flows, saw purchasers from over 50 nationalities make up 54% of the purchasing activity; cross border investment flows picked up rapidly in France towards the end of the year, focussed on Paris, with cross border volumes increasing almost 100% on Q3 and 350% on Q1 levels—albeit from low levels; a small number of large, opportunistic deals also ensured Spain remained a cross border destination; and CEE markets continued to attract a significant share of foreign investors and in total attracted the fourth largest share of cross border capital.
 
Nigel Roberts, Chairman of EMEA Research at Jones Lang LaSalle said: “The focus of international capital is likely to widen further in 2010 with foreign purchasers more active in more markets than in 2009, driven by increased confidence and movements in relative pricing, assuming the pace of economic recovery and financial stability is maintained.
  
Arthur de Haast, Head of the International Capital Group at Jones Lang LaSalle said: “The increase in transaction activity in EMEA in 2010 will be mirrored in Asia Pacific and the Americas.  We expect global cross border investors to continue to play an important role in providing liquidity for large deals in core investment markets in EMEA.”