Asia Pacific commercial real estate markets to outperform those in U.S., Europe in 2011, reports ULI-PwC forecast; Singapore, Shanghai, Mumbai, Hong Kong, New Delhi rated top investment markets
December 8, 2010
– The "cloud has been lifted" from Asia Pacific real estate markets, with the fiscal outlook for most of the Asian countries more promising than that for Europe or the United States, according to Emerging Trends in Real Estate® Asia Pacific 2011, a real estate forecast jointly published by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC).
"Many, if not most, Asian economies have rebounded to pre-crisis levels, and real estate markets, although mostly slower, are headed toward some semblance of normalcy," said ULI Asia Pacific Chairman C.Y. Leung, chairman of Asia Pacific, DTZ. "The distress that was so widely predicted a year ago for most of the region's largest markets has by and large failed to materialize." He noted that steady activity by buyers indicates that Asia's real estate markets "are strong enough to grow into the high expectations current pricing trends imply," particularly because of the shortage of both housing and commercial properties that persists in many areas.
"The economies and financial systems in Asia Pacific have gradually improved over the years. The demand for property, especially in the emerging markets, has been growing. With the release of QE2 (a second round of quantitative easing by the Federal Reserve Board) in the U.S., more funds are expected to flow into Asia Pacific markets. Property would be an alternative choice of investment after equities," said KK So, Asia Pacific Real Estate Tax Leader of PwC. "However, investors should avoid taking excessive credit risks, and pay attention to policy changes," he added.
Emerging Trends, released at a series of events in Asia over the last several days, provides an outlook on Asia Pacific real estate investment and development trends, real estate finance and capital markets, and trends by property sector and metropolitan area. It is the fifth Asia Pacific edition of the highly regarded Emerging Trends in Real Estate® annual investor survey. The report is based on the opinions of more than 280 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
Top Investment Markets for 2011
The predictions Emerging Trends makes for Asia are based heavily on projections for strong activity in China and India. "I think there are buying opportunities for some time," states one investor. The report rates Singapore, Shanghai, Mumbai, Hong Kong and New Delhi as the top five investment markets for next year:
* Singapore , the top rated investment market, continues to attract major investors as its financial and high-tech industries flourish. The city's gross domestic product (GDP) growth rate is expected to finish this year in the double digits, and remain in the four-percent range the next three years. "This growth is mainly attributed to foreign awareness of the prospects that Singapore has to offer; however, domestic capital involvement seems to have increased…It's a mature market and carries less political risk than others." Industry sectors of most interest to investors: residential, office and retail.
* Shanghai is ranked second for investment potential, falling from its top position in the 2010 report, which indicates that sharp increases in property prices in the city may have dampened some investor interest. Still, overall sentiment is that the city is set firmly for recovery and will remain a favored investment target. More than half the survey respondents believe that retail is a smart buy, and more than one-third are interested in the office sector. Demand remains strong for luxury and residential properties. The city also scored high marks (ranking third in the survey) for development – particularly in the office sector – despite government efforts to limit overbuilding and speculative purchases.
* Mumbai ranked third as the most promising investment market, and first as the most favored development market. "Mumbai is clearly the best performing and most active real estate market," the report says. Despite some concerns about oversupply, development potential for most real estate sectors remains promising in this city. In terms of investment, buying opportunities "ring out" in the retail, apartment and industrial sectors.
* Hong Kong ranked fourth for investment prospects; its global appeal is a strong factor in its economic rebound, and robust demand is driving up rents. Although the development outlook is less positive (Hong Kong ranked 12th overall for development prospects), Emerging Trends notes that the residential sector shows potential. "Hong Kong is an area where people continue to move into bigger apartments," says the report. Among the choices of "buy, sell or hold" by property type, "hold" is the top choice among survey respondents for each sector.
* New Delhi ranked second for development prospects, and fifth for investment prospects. The driving force: the government's plans to boost infrastructure with new roads, railways and airports; and its approval of development plans for tens of thousands of acres of land for urban development. Foreign institutional capital is drawn to the city, with housing and hotels as the most favored categories.
Among all the property types, Asia's residential sector ranked highest in both the investment and development categories. Best bets for residential investment in 2011: Mumbai, Bangalore, Jakarta and Ho Chi Minh City. Retail ranked second as the most attractive property type for investment and development. Best bets for retail: Ho Chi Minh City, Shanghai and Mumbai. "Recovery (in retail) throughout the Asia Pacific won't be near the struggle other countries continue to face after the start of the recession in 2007. Projections suggest a jump in spending from both domestic and global consumers," notes the report. The office sector was viewed less favorably, and ranked higher for investment prospects than development, with interest from foreign investors limited to "very, very, prime" locations. Half the respondents listed Tokyo as the top market for office investment, followed by Jakarta, Ho Chi Minh City and Singapore.
On the whole, survey participants regard Asia as the part of the world that is showing the most growth, in terms of the real estate industry. "The area's economic expansion should be the key driver to help propel commercial real estate investments and developments across the region," Emerging Trends says. "The real estate market is back, fund raising is strong in Asia, local banks are providing financing, and capital is everywhere."
To download a copy of the report, go to: http://www.uli.org/~/media/Documents/ResearchAndPublications/EmergingTrends/Asia/2011/ET_Asia2011.ashx
About the Urban Land Institute
The Urban Land Institute (www.uli.org) is a global nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has nearly 30,000 members representing all aspects of land use and development disciplines.
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SOURCE Urban Land Institute