Global direct property investment is expected to fall by a third this year as reduced debt availability and investor confidence takes its toll, according to the latest figures by Jones Lang LaSalle.
The firm released its Global Capital Flows Report today, in which it predicted a 30% decline on 2007’s figure of $759bn (£385.5bn), with the Americas and European markets seeing a ‘material decline in full year volumes’.
It said Asia ‘may be more resilient.’
The report said direct investment volumes will be restrained by: ‘buyers and sellers adopting “wait and see” strategies; prices having peaked in 2007 in many major markets; a misalignment between buyers’ and sellers’ price expectations; reduced availability of debt, tougher lending criteria and increased debt costs; reduced willingness and capacity to transact large lots sizes, a narrower spectrum of investors; and more exacting due diligence which leads to longer transaction processes.’
Tony Horrell, international director and head of European capital markets at JLL, said there are positive signs for investors going forward.
He said: ‘We do not expect a strategic and planned withdrawal of capital from real estate in 2008, or investors to significantly adjust their allocations to the asset class.
'Forecasts for 2008 remain positive and the long-term trends in real estate, such as the growing credibility of real estate as an investible asset class, improving transparency, urbanization, and restricted supply, continue to be positive drivers.’
According to JLL’s figures, domestic investment remained at around $400bn (£203bn) globally in 2007, similar to 2006’s volume, while cross-border investment increased by $58bn (£29.4bn) to $357 billion in 2007 and of that, inter-regional investment accounted for $242bn (£122bn).