(LOS ANGELES) Global commercial real estate sales rose to US$1.04 trillion for the first time last year, driven by Blackstone Group LP’s purchase of Equity Office Properties Trust and land transactions in Asia.
One third of the total was office space, with nearly 1.2 billion square feet of offices worth US$434 billion changing hands, New York-based real estate research firm Real Capital Analytics said in a report on Tuesday.
In 2006, there were about US$700 billion of total global transactions.
Billionaire Sam Zell’s sale of Equity Office for US$39 billion including debt a year ago was the biggest leveraged buyout up to that time.
That deal and Blackstone’s subsequent sale of buildings from the Equity Office portfolio added US$66 billion to last year’s global transactions, Real Capital said in its report.
‘In the US, transaction activity was a record year, but it was all privatisation and massive portfolios,’ Robert White, president and founder of Real Capital, said in an interview.
‘In Asia, development land is where all the dollars are flowing to.’
Office space represented 32 per cent of total sales last year, Real Capital said. The total square footage that sold is equivalent to all of the office space in London, Tokyo and New York combined, the research firm said. With more than US$209 billion in transactions, the US accounted for half of global office sales.
Real Capital identified 114 cities worldwide that each had more than US$1 billion of commercial property sales.
Forty-eight of those cities were in North America, 35 were in Europe and 21 were in Asia. Real Capital limits the size of transactions it tracks to US$10 million or greater, meaning the total size of the global commercial real estate market last year may have been closer to US$1.5 trillion, the company said.
Almost half of all land acquired by developers around the world last year was in China. Land transactions totalled US$50.7 billion in China, more than double the US$25 billion in the US, the next most active country.
Land purchases in China and other parts of Asia were driven by a lack of available buildings in many growing regions, Mr White said. ‘There are really very limited institutional-quality, income-producing assets that are sold in the open market or even exist,’ he said. Commercial property sales slowed in the US and Europe in the fourth quarter of last year as the collapse of the sub-prime mortgage industry spread from the residential market to commercial lending, making it harder for real estate investors to find financing.
Growth in Asia will help make up for this year’s expected drop in transactions in the US and Europe, Mr White said.
‘The US was a little bit more than half of global volume in 2007,’ he said.
‘In 2008, it will most likely be well under half. Emerging markets will continue to grow.’
Worldwide property transactions this year likely will ‘be comparable’ to 2007, Mr White said. ‘It might even be off a little bit.’
Real Capital collects transactional information for property sales and financings and generates reports on capitalisation rates, market trends, pricing and sales volume.
The company compiled the Global Capital Trends report using its database of transactions. The sources of its information vary by country.
Its data partners include Property Data in the UK, Thomas Daily in Germany and HBS-Research in France.
Source: Bloomberg (Business Times 14 Feb 08)