Our preliminary numbers for Q2 2012 are in and they are showing a 10% increase on activity from the first quarter. Volumes are now back above the psychologically important US$100 billion mark globally with all regions seeing gains from Q1.
A 10% rise on the back of a Euro Zone crisis, ever tightening debt markets, concerns over a slowing economy in China and political problems all round the world is another sign that commercial property retains its attractions. The Americas was the most active region again, with a 33% rise quarter on quarter, on the back of a 22% rise in the US and an 80% rise in transactional volumes in Canada.
European markets also had a solid quarter considering the circumstances of almost constant economic crisis, Greek elections and worries about the Spanish banks. Of the larger markets, Germany was the only one to record a decline while the UK and France both increased. On a year on year basis both Europe and the Americas are down, but only slightly.
Asia Pacific came in almost flat at US$24 billion and is the only region to show an increase year on year. All of the main markets rose, with China, Australia, Hong Kong and Singapore seeing gains while Japan slipped in what is traditionally a quieter quarter for the region’s largest market.
Given the more active investment market this quarter we are maintaining our full year volumes at circa US$400 billion, given that the second half of the year tends to be more active than the first, especially the fourth quarter. The majority of activity in the first half of 2012 has mirrored the market since the financial crisis; core, prime locations are purchaser’s favourites, but the market quickly drops away if you move too far away from these locations.
The big question for the second half of 2012 and beyond is when will these secondary markets start to look attractive to investors again? Secondary yields continue to drift out partly due to a lack of transactions, widening the gap with prime locations even further where yields continue to compress driven by the weight of investor interest. Given the reality of weak global economic growth for the remainder of 2012 at least and banks unwilling and unable to lend on secondary investment opportunities then further price falls look inevitable. However, we will reach a market clearing point at which the secondary stock reaches a price where investors will be enticed back in. The downside for those investors currently holding the stock is that the prices new investors will be willing to trade at are almost certainly below where we are at the moment.