Jones Lang LaSalle Examines Cross-border Capital Flows

Foreign Capital Targets to Expand from Top Two U.S. Property Markets to 10 Major Markets by Year-End 2011

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. March 09, 2011

CANNES, France - March 9, 2011 - The flow of global capital is headed back into U.S. real estate as foreign investors seek to add prime domestic real estate to their ownership portfolios. In 2010, inter-regional investment volumes in the Americas doubled between 2009 and 2010 from US$14 billion in 2009 to US$31 billion in 2010.

This strong bounce back was not only driven by the domestic market, but was led by inter-regional activity, as foreign investors and purchasers took advantage of a pick-up in activity in the core U.S. markets to trade. Inter-regional purchasers transacted US$5.6 billion in 2009 and US$13.37 billion in 2010.

Investor interest is coming from overseas funds, life companies and private equity which is creating competition for limited supply and causing investor interest to expand from the primary New York and Washington, D.C. marketplaces and into secondary and tertiary market locations.

“While most foreign investors sought comfort in the best performing U.S. markets such as New York and D.C., interest has begun to extend to the five major U.S. markets, and within 12 months, they will be interested in eight to ten others throughout the country,” Steve Collins, managing director for Jones Lang LaSalle's International Capital Group. “We talk to international investors every day and while most of them have also begun to target Boston, Los Angeles, San Francisco and Chicago, we think that by the end of the year, Seattle, San Diego, Atlanta and Houston will be added to the mix for strategic purchases.”

Capital sources
“Last year foreign purchasers took advantage of a pick-up in activity in the core markets to trade effectively. The top U.S. capital sources included global funds, followed by Israel, Germany, Canada and South Korea. The life companies and open-ended funds are looking for transparent and safe places to park their money and commercial real estate is looking stronger every day,” added Collins.

There is ample evidence of a continued trend of increased foreign interest in the United States for 2011 and it is already spreading into the secondary markets:

After securing a great deal of international interest, Jones Lang LaSalle Capital Markets recently closed the sale of trophy property 3344 Peachtree in Atlanta for $167.25 million. The firm also capitalized on interest in Charlotte, North Carolina to sell Moorhead Medical Plaza, achieving the best cap rate ever for a medical office building (MOB) sale in a secondary market. That two-building MOB sale garnered $47.7 million. Among the top five contenders for the sale of 353 North Clark in Chicago were two Korean firms, though the sale eventually went to a U.S. investor. The firm has also seen interest in tertiary markets including the closing of a seven-building complex called Inverness Center in Birmingham, Alabama. It is also offering a 4.34-acre River Walk parcel mixed-use development property, located on the famed River Walk in downtown San Antonio on behalf of Univision.

“With increased competition underway for prime assets causing cap rate compression, foreign capital needs to lower their yield thresholds down from seven percent or look to secondary markets to hit their returns,” said Jay Koster, President of Jones Lang LaSalle's Americas Capital Markets Group.

Jones Lang LaSalle Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. Our in-depth local market and global investor knowledge delivers the best-in-class solutions for our clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In 2010 alone, Jones Lang LaSalle Capital Markets completed $43 billion in investment sale and debt and equity transactions globally. The firm's dealmakers completed $33 billion in global investment sales and buy-side transactions, equating to nearly $140 million of investment trades completed every working day around the globe. In the United States, Jones Lang LaSalle grew its office broker volumes by 257 percent in 2010 and is quickly gaining market share across all property types. Our Capital Markets team comprises approximately 800 specialists, operating in 185 major markets worldwide.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 60 countries from more than 1,000 locations worldwide, including 185 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company's investment management business, is one of the world's largest and most diverse in real estate with more than $41 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com.