Commercial Real Estate Trends Support Global Recovery

While there’s no doubt the global economy is recovering, the pace at which markets are rebounding is anything but consistent, according to Colin Dyer, chief executive officer of Jones Lang LaSalle, who spoke about leading commercial real estate trends that are supporting the global economic rebound during the 2011 World Economic Forum last month in Davos, Switzerland. "Although the world still must work through significant financial, economic, and political risks, it’s clear we’re getting back on track with the comeback of a number of positive, long-term commercial real estate trends," Dyer said to the global economic, financial, and political leaders in attendance. Chief among the commercial real estate trends Dyer sees emerging:

1. Property market recovery encourages globalization of capital flows and liquidity improvement in the investment markets. "We expect global direct investment into commercial real estate to surge up by 20 to 25 percent to $380 billion in 2011,” Dyer said, with 4Q10 global investment volumes alone topping $100 billion, demonstrating momentum for increased investment. More transactions signal improved investor confidence that will encourage investors to assume greater risk to achieve their intended returns while the banking industry simultaneously regains its health.

2. Commercial property recaptures its place as a preferred institutional investment category. Institutional investors are once again setting their sights on commercial real estate as a solid investment. "Along with the aging population in many parts of the world, governments and companies will need to generate more cash to pay beneficiaries and, in turn, are very likely to increasingly tap commercial real estate as an asset class due to its income-producing characteristics," Dyer said.

3. Capital sources demand increased transparency. "Investors are demanding the ability to see clear exit strategies before placing their capital into commercial real estate,” Dyer said. As a result, there will be an emphasis on demonstrating improved transparency and regulatory measures.Though indicators show positive signs, many risks remain on the road to global economic recovery in 2011, Dyer warns. He cites concern for the ongoing challenges represented by today’s trade imbalances and government deficits worldwide. “For example, Germany and China show huge surpluses while the United States is running massive deficits. These trade imbalances continue to cause pressure across the global economy.” While this and other legitimate concerns remain, Dyer believes the performance of commercial real estate is looking better than last year. “We expect the long-term trends we noted to become even more pronounced as the year unfolds."