Profit-taking behind 640pc surge in sales

PUBLISHED : Wednesday, 22 September, 2010, 12:00am
UPDATED : Wednesday, 22 September, 2010, 12:00am

A surge in profit-taking by foreign funds invested in mainland commercial property helped lift the value of deals in the sector in the first half of the year by a massive 640 per cent, to US$4.3 billion.

The sell-offs were mainly triggered by a liquidity crunch caused by the global financial crisis and a need to take profit on mainland investments, according to Alistair Meadows, director of property consultancy Jones Lang LaSalle's international capital division for Asia Pacific.

Since the sellers of the assets were foreigners while the buyers were domestic, the deals were recorded as cross-border investments in the half-yearly survey by JLL, and catapulted China from the sixth most active market for such transactions worldwide to the fourth most active.

In the same period last year, total cross-border investments amounted to US$580 million. Around the globe cross-border activity - arising when purchaser, vendor, or both originate from outside the country where the asset is located - recorded a rebound in the first half of the year as confidence improved and investors searched for value, the survey found.

Global commercial real estate investment totalled US$132 billion for the first half of 2010, compared with US$76 billion in the first half of 2009; and the cross-border component of the total rose to 43 per versus 31 per cent previously. Meadows said he expected international funds would return to the mainland in the long run, but such a trend might not emerge in the second half of the year.

Elsewhere in the region, a return to pre-crisis levels of cross-border investment was evident in increased activity from Asian buyers in major international markets, including the commercial and residential sectors in London, Meadows said.

'Cross-border capital from both institutional and private Asian investors in Malaysia, Singapore, Hong Kong, and Korea will continue to make a major impact on tier one global markets,' he said.

Britain has been the most popular destination for cross-border investment so far in the first half of this year, with US$7 billion invested, while Germany replaced the United States as the second most popular destination.

The US was relegated to third place in first half year despite a doubling in transaction values from US$2.2 billion to US$4.3 billion.

Arthur de Haast, head of the international capital division at Jones Lang LaSalle, said mixed economic news plus longer transaction processes due to investor due diligence may mean that investment volumes do not continue to grow at levels seen in the first half.

'However, full-year volumes will be between US$275 billion and US$300 billion for 2010, significantly ahead of 2009's US$209 billion, with cross-border investors continuing to be very active,' he said.

Cashing in

In the first half of last year cross-border investments amounted to US$580 million

This year the figure soared to, in US dollars, $4.3b



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