You can’t stray too far from your work… Or so it felt sitting in the Great Khan Irish Pub in Ulaanbaatar, Mongolia. Irish pubs are the McDonald’s of drinking establishments: they are everywhere and have a sort of dependable quality. We were enjoying lunch, while nearby a group of pin-striped suits were being sold on the glories of serviced residential for expats. “This market is booming,” emphasised the ski jacket-wearing developer. Booming indeed: welcome back, global real estate investment!

According to Jones Lang LaSalle's data, global crossborder investment rose by 60% in 2010, accounting for nearly half ($130bn) of all direct commercial real estate investments ($318bn). This proportion is equal to the boom years of 2006-07. It is no surprise that during the financial crisis, domestic trading held up better than crossborder activity – investors sensibly focused their attention on familiar markets. This past year, however, equity-rich buyers have led a push for quality assets in mature, transparent markets, supporting the resurgence in crossborder volumes over riskier secondary and tertiary domestic markets. This has pushed up prices and we expect both domestic and crossborder transaction growth to continue in 2011 as investors move up the risk curve. That meeting at the Great Khan is a perfect example of shifting investor sentiment.


But it takes a brave investor to forsake not only their own borders, but to jump the continental divide. Inter-regional volumes reached $82bn in 2010 and constituted one fourth of overall global volumes. At their peak in 2007, inter-regional volumes were nearly triple 2010 volumes at $243bn, making up over a third of total volumes.  The pick-up in inter-regional activity has proceeded on par with the overall market. It would appear that a sizeable number of investors are looking not only outside of their home markets, but across to other continents.

Globally offices remain the most popular inter-regional investment, accounting for 58% of the total inter-regional market, unchanged as a share from 2009. Inter-regional hotel transaction volumes tripled in 2010 (from $3.3bn to $10bn) whilst the retail sector saw an increase of 31% ($13bn to $17bn). We believe these three sectors will remain the focus for inter-regional investors in 2011. Being the most liquid sectors, it is not really a surprise that they are leading the market over, say, residential stock in emerging markets.

As the market recovers, the players are also changing. The new top 10 purchasers last year included Canada, India, Malaysia, and Saudi Arabia. Canadian and Malaysian capital was dominated by institutional investors whereas the Saudi and Indian purchasers were mainly high net worth individuals or private investors. These new players replaced Australia, China, Spain and the UK who for various reasons including increased hedging costs, a refocus on domestic markets and sovereign debt issues, were less active purchasers in 2010.

Looking ahead, Jones Lang LaSalle expects continued growth in both domestic and crossborder activity throughout 2011, with the competition for the best core assets extending the increase in prices we saw in 2010. However, price sensitivity will also push more investors up the risk curve, deeper into both emerging markets and into secondary locations in more mature markets. The Great Khan and others like it should expect more business meetings as the year wears on.

Paul Guest is global capital markets research director for Jones Lang LaSalle