INVESTMENT in Shanghai's real estate market cooled sharply in the second quarter of this year as investors became more cautious in their decision making.

Only 3.8 billion yuan (US$560 million) worth of major real estate acquisition deals were concluded in the city between April and June, compared with 18.9 billion yuan in the first quarter, Jones Lang LaSalle, a major real estate services provider, said in a latest research.

"Investors have shown more caution toward making acquisitions, particularly in the last month, as a result of the European debt crisis and government measures unveiled in April to cool the country's residential market," said Michael Klibaner, head of research for Jones Lang LaSalle China. "Investors have been closely monitoring rental growth, interest rates and lending liquidity."

Deals concluded in the second quarter included Platinum Tower, a 33,954-square-meter Grade A office building in Xintiandi, Luwan District, which was sold by SEB Immobilien to CSI Properties Ltd for 1.85 billion yuan at the start of the quarter.

Hang Seng Bank in May purchased about 7,000 square meters of office and retail space from HSBC for own use in HSBC Tower in Lujiazui in Pudong New Area. Hang Seng Bank also obtained the naming and signage rights to the building for 510 million yuan.

"Strong growth in capital values and only a moderate increase in rents for residential and retail properties continued to push down yields," said Chester Zhang, assistant manager for Savills China Research. "Uncertainties in the global economic outlook and a government's determination to cool the country's housing market have jointly affected investors' appetite."

Last year, 22 en bloc property deals worth 25.6 billion yuan were sealed in the city, up 42 percent from 2008, Jones Lang LaSalle said.