border transactions rose 50 percent to comprise half of the $103.5 billion of direct commercial real estate investment transactions completed in the second quarter of 2011, according to Jones Lang LaSalle's new Global Capital Flows report. Cross-border flows accounted for over half of all volumes. Given the strong start to the year, Jones Lang LaSalle still expects market volumes to reach its full year forecast of $440 billion, so long as current market volatility and uncertainty abates and there are no further significant economic setbacks. In an era of instability, good quality commercial property will benefit, but deals, particularly larger ones, will take longer to complete. The upsurge in market volatility in August could dampen enthusiasm and delay large ticket transactions. Good quality, core property will benefit, but secondary markets will not. Inter-regional volumes more than doubled year-on-year, reaching nearly $39 billion in Q2 2011.This rise is considerably larger than the 50 percent increase in the whole market, but it is unduly influenced by a number of large deals. In Q2, there was a notable absence of big ticket, single asset transactions: there were fewer than ten $500 million-plus single asset sales, roughly the same number as a year previous. There were over 20 in Q1. Of the top 10 markets, four markets were in Asia (Hong Kong, Seoul, Shanghai and Singapore); three were in the Americas (New York, Toronto and Washington DC); and three were in EMEA (Frankfurt, London and Paris). Office was the dominant sector in Q2, accounting for just over 40 percent of total volumes, down from 45 percent in Q1. Retail's share rose to 33 percent from 28.5 percent and the upsurge in hotels volumes made it the third most liquid sector globally. The unlisted funds were by far the most active investor in Q2, with net acquisitions of +$17.5 billion. Meanwhile, the unlisted developers and property companies were the largest net divestors (-$8.6 billion). In this era of currency volatility, based on historical data, no significant relationship between FX and cross-border capital flows was found. Both domestic and cross-border capital grew in Q2, but with very different drivers. This quarter, the US was once again the most active source of capital at $27.1 billion, up $7 billion from Q1. But the rise was all domestic: excluding the global funds, the US was tied with Singapore as the cross-border leader but at $2.6 billion, the US sum was the same as in Q1. The booming US investment activity is largely home-grown: over 110 US cities appeared in our database in Q2 versus less than 90 in Q1 and only 60 in Q2 2010. In addition to surging US capital, Q2 saw a doubling of acquisitions by the global funds (to $20.6 billion) and significant jumps in British, Canadian and German capital. Interestingly in these three countries most of the new capital was also spent domestically. Do not get the wrong impression: big rises in domestic direct real estate investment from some big players do not mean the cross-border market stood still. In Q2 there was a total of $38 billion in cross-border purchases, up from $22.9 billion in Q1, a 66 percent increase. This was driven by a doubling of foreign bound Singaporean capital, led by several major acquisitions in China, and by a huge surge by the global funds - a theme we will pick up on later in this report. Purchases by the other top cross-border investors (the US, Germany, Canada and the UK) were broadly unchanged. In net terms (acquisitions minus disposals) the global funds, led by the unlisted funds, were by far the most active, with net purchases of over $13 billion. In contrast, the next most active were Singapore ($2.1 billion) and Sweden ($800 million), but while the latter was predominantly domestic, Singaporean capital as already mentioned was looking abroad for return, given previous capital appreciation in its home market. Alongside the global funds and Singapore, the largest net cross-border acquirers in Q2 were Kazakhstan and Indonesia, both at around $550 million. The latter was almost exclusively the purchase of Aviva Tower in London. Global funds drive cross-border activity in first half of 2011. For the first half of 2011, national firms investing domestically and private equity and unlisted funds dominated the scene, with privates in a supporting role, investing across borders. In an era of enhanced economic and financial risk, this marks an interesting dichotomy: not true risk aversion, as funds continue to raise reasonably attractive levels of capital, but rather a willingness to invest at home directly and to trust experienced managers with "'riskier" cross-border investment. With continuing sovereign debt concerns in Europe and the US, and in light of August's market turmoil, this will continue in H2.