by jbs120508e3 — December 10, 2008—While the global credit crunch had a dramatic impact on commercial property transaction volumes during the first six months of 2008 with capital values likely to remain under pressure well into 2009, corporate sales rebounded as a slower economy and increased costs of capital result in a surge of corporate sale-leasebacks and dispositions of property, according to Jones Lang LaSalle’s H12008 Global Real Estate Capital Report.
The trend for corporate sale/leasebacks has been developing over the past few years, notes the company. In the first six months of 2005, sale-leasebacks were some $10.4 billion of the transaction volume internationally. This rose to $20.7 billion in 2006’s first half and $30.7 billion for the same period in 2007.
“With global economic growth forecast to slow further in 2009 and continued weakness in financial markets, the rise in corporate sale activity will continue and should reach $34 billion by year-end,” said Steve Collins, managing director of Jones Lang LaSalle’s International Capital Group. “We’ve seen a dramatic shift in sellers that occurred as a result of the credit crunch and corporations’ need to access affordable capital outside the debt markets.”
The growth in corporate activity extends in the major global regions with 56% of corporate sales occurring in Europe; about a third were in the Asia Pacific region and the Americas counted for 9%, with $1.1 billion sold in the US and $0.9 billion in Canada.
“[S]ale-leasebacks offer corporations the opportunity to not only redeploy capital from their owned real estate, but also to shift future disposition risk and enhance occupancy flexibility over time,” said Kenneth Rudy, Jones Lang LaSalle Capital Markets President and COO.
Jones Lang LaSalle says that in the coming years, there will be more mandates in the US and for US multi-national companies for disposition of surplus real estate. This portfolio rationalization comes against the backdrop of general nervousness about the economy, as well as from M&A activity.
While sale-leasebacks were up significantly during the first part of 2008, overall investment sales were down 42% from the same period last year, according to the report. At $233 billion, investment volumes are nearing 2005 levels, where just $433 billion was invested for the entire year.
The Jones Lang LaSalle report also shows that the globalization of real estate continues, with cross-border transaction continuing to account for 45% of global transactions, just slightly lower than the 46% reported for 2007.
In its Regional Reviews section, the report shows that during the first half of 2008, transaction volumes in the Americas fell 56% from a year earlier to approximately $75 billion. It also showed that the transactions most impacted have been large portfolios and M&A activity, both of which helped supercharge the US market between 2005 and 2007.
