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Published on April 17, 2008

Tony Horrell, international director and head of European capital markets at the company said reduced debt availability and lower investor confidence are likely to last for much of the first half of this year. This is expected to last as long as the debt squeeze continues to ripple through markets.

Jones Lang LaSalle sees many factors that will constrain volumes this year. They include buyers and sellers adopting a "wait and watch" strategy; the price peak attained last year in many major markets; a misalignment between buyers' and sellers' price expectations; reduced availability of credit, tougher lending criteria and increased debt costs; reduced willingness and capacity to transact large lot sizes, a narrower spectrum of investors; and a more stringent due diligence process which leads to longer transaction periods.

However, Horrell said the company does not expect a strategic and planned withdrawal of capital from real estate this year, or investors significantly adjusting allocations to the asset class.

Forecasts for the year remain positive and long-term trends in real estate - such as the growing credibility of real estate as an asset class, improving transparency, urbanisation and restricted supply - are positive factors.

While domestic investment was at US$400 billion (Bt12.6 trillion) globally last year, cross-border investment increased by $58 billion to $357 billion. Of that, inter-regional investment accounted for $242 billion. Cross-border transactions now account for 47 per cent of total transactions while inter-regional transactions account for 32 per cent. 

Meanwhile, the Asia Pacific saw remarkable growth in both, the first half and the second half of last year. Despite the downturn in some major real estate markets and the weakening US dollar, capital continued to pour into the region in the second half of the year.

Direct commercial real-estate investment touched a record $121 billion last year, up 27 per cent. Japan, by far the largest market in the region, accounted for 50 per cent of total transactions. Another 36 per cent of transaction activity took place in four markets: Australia (15 per cent), Hong Kong (7 per cent), China (7 per cent) and Singapore (7 per cent). 

Cross-border volumes in the Asia Pacific surged to $57 billion last year, accounting for 47 per cent of total transactions. All major markets in the region registered increases, with the exception of the Philippines and Thailand where cross-border volumes were constrained by rigid foreign ownership legislation and a lack of investment-grade assets on offer.

The Nation