Picking up on my colleague’s blog, and looking to the future, I fear the investment market is still in a state of post-credit crunch flux. New players, merged entities, REITS, pension funds, insurers and banks are all reviewing their strategies and investment opportunities. The outcome of these musings will be even more evident in 2011 and beyond… but today’s market remains sluggish. Quarterly volumes are a third of what was traded at the peak of the market in 2007. Historically, the lowest quarter for volumes was Q1 2009. The market has been gradually improving ever since but the pace is slow. In 2010, we expect EUR 100 billion to transact, which is a 30% increase on the previous year but fully 60% below 2007’s level.

Looking ahead, a sudden boom in bank lending is unlikely in my view. Instead, we will be faced with roughly the same amount of equity available to trade. Based on marginally improved LTV’s, combined with some increase in prime capital values and assumptions of static (at best) secondary markets, total investment volumes in Europe are unlikely to rise above EUR 115 billion in 2011. Alternatively, we could see pricing expectations of secondary assets shift and become more realistic. This could translate into more interest in secondary and more trading of such stock. This could push investment volumes up to EUR 130 billion in 2011, but higher is highly unlikely.

In other words, in 2011 and beyond I can only see a slow recovery in real estate trading with only marginal improvements on the way. Financing issues and a lack of good stock will be the main limitations. A more vigorous increase in trading volumes can only be achieved by a change in the perception of high risk secondary stock and its present pricing.