Positive commercial growth expected in 2012

According to a report, the number of commercial real estate investments saw a sharp increase during 2011, said the most recent Jones Lang LaSalle's Capital Markets Outlook.

According to a report, the number of commercial real estate investments saw a sharp increase during 2011, said the most recent Jones Lang LaSalle's Capital Markets Outlook.

The report indicated that preliminary investment transactions spiked 44 percent on a year-over-year basis, totaling roughly $160 billion in 2011. This included investments in office, industrial, retail and multifamily real estate projects.

Meanwhile, the report predicts that the investment transaction volume will continue to increase in 2012, but is expected to be at a slower pace than the rate experienced during the prior two years.

"While total investment activity in 2012 is projected to increase 15 to 20 percent over our preliminary December estimate for 2011 volume of $160 billion, this does represent a slowing of growth from the estimated 44 percent increase in 2011," said Jones Lang LaSalle's Capital Markets president Jay Koster. "For 2010, total investment volume grew 117 percent, but driven largely by a historically anemic 2009 transaction volume base."

As a result, investors entered 2011 with an aggressive attitude towards real estate investment in the first half of 2011. However, by the third quarter, a number of economic indicators caused investors to invest at a slower pace.

According to the report, two of these primary economic factors that slowed growth in the latter-half of 2011 and may continue to affect investors are global economic uncertainty and a tougher debt market.

Since these two issues have yet to be resolved, many investors are still concerned about making investments with certain levels of risk that come with projects that have a high level of vacancies, need capital improvements or located in secondary markets.    

"We need active participation by investors across all risk categories to see a well functioning, fully recovering market," said Koster.

Despite a slow in investor activity during the third and fourth quarters, the report states that the company remains optimistic about the industry during the new year. However, as a result of the European debt crisis, pricing has become increasingly more difficult to predict - leaving the analysts positive about investment opportunities in 2012, but not completely certain about how they will trend.

Regardless of uncertainty, the demand for commercial mortgage-backed securities has remained strong as a growing number of investors gravitate towards core products.



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