Real estate acquisitions rise for first time since end ‘07

The number of global property purchases has increased for the first time in 15 months with $62.8bn of sales during Q2 – up 17 percent compared to the previous quarter, according to Real Capital Analytics. Distress though remains 'alarmingly' high with $233bn of property now in trouble.

The level of global property acquisitions rose for the first time since the end of 2007, with 17 percent more sales taking place in the second quarter of 2009 compared to the previous three months.

In a marked turnaround from the past five quarters, commercial property sales rose to $62.8 billion in the past three months against a low point of $53.6 billion in the first quarter, according to Real Capital Analytics.

Among the regions that saw significant increases in deal flow were India, East Asia and Latin America, which all saw transaction levels more than double between the first and second quarters.

Global office sales and land deals in China were among the drivers, with office sales rising to $19 billion during the second quarter – the first sequential rise for two years. There were more than $36 billion of land deals closed in the first half of 2009, Real Capital Analytics’ global capital trends report said – $32.5 billion of which were located in China.

According to the New York-based real estate data provider, the magnitude of China’s influence on the global property markets is “clear. It’s sales volume in [the first half of 2009] exceeded that of the US and the UK combined.” World transaction levels would also have been down 8 percent in the second quarter compared to the first three months of the year, had China’s activity been excluded.

In another sign that liquidity is returning slowly to the market, deal size has increased since the start of the year, with the average deal size now roughly $65 million compared to $50 million during the past three quarters.

However Real Capital Analytics warned the level of distress in the market remained at “alarming levels” , with $233 billion of property now in default, foreclosure or bankruptcy at the end of the second quarter – up 112 percent since the end of 2008 and up 49 percent since the first quarter.

Distress was “mountainous” in the Americas region, “rocketing higher and faster than anywhere else in the world”, with $136 billion of distressed commercial real estate as of the second quarter, up from just under $80 billion in the first three months of 2009.