Global investment in real estate may increase 26 percent to US$600 billion this year

Global investment in real estate may increase 26 percent to US$600 billion this year as investors chase stable returns, according to a report published Wednesday by Jones Lang LaSalle Inc.

Investment in the first half amounted to US$290 billion, with spending in Germany and Japan almost doubling, said Jones Lang LaSalle, the world’s second-largest publicly traded real estate brokerage. Investment in the Americas rose to US$129 billion, followed by US$117 billion in Europe and US$43 billion in Asia.

“Across the world, fund managers are receiving record fund inflows as populations in developed countries approach retirement age,” Tony Horrell, head of Jones Lang’s international capital group in London, said in the statement. “Many of these funds are attracted by real estate’s strong stable returns.”

Investors are buying more shops, offices, hotels and industrial properties to broaden their range of assets. Banks such as Goldman Sachs Group Inc. and other buyers are targeting countries such as Germany and Japan, where property returns have lagged behind markets such as the U.K. and Ireland.

Real estate investment is becoming increasingly global with US$128 billion, or 44 percent of all investment, spent on cross- border transactions in the first half, said Jones Lang. That was 69 percent higher than in the same period a year ago, it said.

Inter-regional spending, involving investors from outside the region where the asset is located, rose 68 percent to US$90 billion, or 31 percent of total spending, from a year earlier, Jones Lang Lasalle said.

“In relative terms, the globalization of real estate investment has had the greatest impact on developing markets, said Horrell. “In Central Europe and some Asian and Latin American markets, inter-regional investors are purchasing the majority of available prime quality stock.”

The U.S. accounted for 43 percent of all investment in the first half compared with 45 percent a year earlier. The U.K., home to the world’s most expensive offices, slid to a 14 percent share from 20 percent in 2005.

Inter-regional investment in the Americas more than doubled to US$33.5 billion, with Middle Eastern investors, buoyed by surging oil prices, accounting for 14 percent of international spending. The U.S. accounted for 96 percent of all investment in the region, with New York, San Francisco, Chicago and Boston the most popular cities for non-U.S. purchasers.

Global investors spent more than US$9.5 billion on U.S. hotels in the first half, in addition to “sizable” office and industrial property purchases, said Jones Lang.

The share of investment going to Germany doubled to 8 percent, with global investors buying more than 40 percent of all the German commercial real estate that was traded in the first half. Transactions in Germany in the first half almost equaled the total for the whole of 2005 as German investors sold a net US$24 billion of assets.

Japan accounted for 8 percent of all real estate investment, up from 5 percent a year earlier. Investment in Japan accounted for half of all spending in Asia compared with 35 percent in the same period in 2005. Investment in Asia as a whole rose 40 percent from a year earlier.

Jones Lang’s total excluded the US$30 billion spent privatizing publicly traded real estate investment trusts such as Trizec Properties Inc., as well US$16 billion on developments funded in advance and more than US$60 billion on residential apartments.