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Mena property deals surge 20% to $166b
Issac John / 13 April 2012
DUBAI — Property transactions in the Middle East and North Africa region staged a strong recovery in 2011 with a 20 per cent jump to hit $166 billion from $138 billion in 2010, a leading real estate investment and advisory firm said.
But the surge in property deals in the Mena region pales in comparison with the 30.5 per cent growth a resilient property market witnessed across the globe, most notably in the Americas, Jones Lang LaSalle, or JLL, said.
Property business across the world increased to $418 billion in 2011 from $320 billion in the previous year.
Property sales in the Middle East region has plummeted in 2008 after reaching a peak of $333 billion in 2007, and reached a 10-year low of $98 billion in 2009.
In an earlier forecast of the UAE property market, JLL said a higher volume of transactions are expected in the country this year amid increasing investor interest while rents in Dubai’s residential market are set to bottom out.
The new growth in transactions will be driven by private investors and high net worth individuals rather than investment institutions, JLL said in a report it released in January.
“We think we will see increased activity in this sector as more confidence returns to the residential sector, perhaps with the UAE continuing to be a beneficiary of the Arab Spring as a relative safe haven, and as more projects get completed and handed over,” said Alan Robertson, chief executive of JLL, Middle East and North Africa.
In the first quarter 2012, direct commercial property transaction volume across the globe demonstrated subdued activity with recorded volumes dropping 23 per cent to $75 billion compared to the same period in 2011, JLL said.
However, real estate fundamental remains attractive despite continuing economic uncertainty. Full year 2012 forecast remain consistent with 2011 at approximately $400 billion, JLL said in a report.
“Major commercial property markets globally recorded a quieter start to the year after a very active 2011, particularly in the final quarter. Also, substantial one-off transactions in established markets, such as the sale of the Trafford Centre Shopping Centre in the UK for $2.6 billion that enhanced volumes in first quarter 2011 were not repeated in the same 2012 period, leading to a fall in total volumes recorded. The decline was also due to sustained economic pressures restricting the availability of debt finance, especially for new borrowing,” the real estate advisory firm said.
Arthur de Haast, Head of the International Capital Group at Jones Lang LaSalle said while volumes are down in the first quarter 2012 and the economic backdrop remains uncertain, the underlying attractiveness of real estate continues due to strong demand and sound fundamentals. “The final quarter of 2011 was one of heightened uncertainty in Europe, but reassuringly policy makers realized the seriousness of the situation and took the appropriate action, which helped to stimulate activity across the continent.”
David Green-Morgan, Global Capital Markets Research Director at Jones Lang LaSalle, said commercial property continues to draw capital and interest from institutional investors, increasingly through allocations diverted away from equities, commodities and other asset classes. “This trend will continue as the attraction of fixed assets increases in line with the predicted rise in global inflation over the medium-term.”
Green-Morgan predicted that while the global economic road ahead might not be completely smooth, investor sentiment remains positive. “The on-going debt issues in commercial property will continue to pose problems for some and present opportunities for others all of which will contribute to transactional activity.”
Haast added that as the prime, major cities of the world such as London and New York would continue to attract large amounts of capital investors are expected to examine more closely the increasing number of opportunities in secondary markets as pricing in this area continues to adjust.
“While investors remain somewhat cautious most are continuing to execute their strategies albeit with longer transaction times and more detailed underwriting,” he said. He said 2012 is likely to be another year dominated by policy responses to changing economic conditions. “For activity to materially surpass 2011, we would need to see more debt available globally and for a sustained increase in activity in secondary markets, which we haven’t seen as yet in 2012.” — firstname.lastname@example.org
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