Experts agree that most of Asia is now firmly on the road to recovery from the global economic crisis. Even so, there could be some speed bumps and double dips on the road ahead. Fundamentals should continue to improve, and declining vacancy rates will likely lead to above-average rental growth during the next two years. But investors should exercise caution while navigating Japan, a few overheated residential markets or several oversupplied office markets.
From the Current Issue
Asia Pacific institutional investors along with real estate consultants, investment managers and fund of funds managers — some of which sponsor our publications — met at the InterContinental Hotel in Hong Kong on 15–17 November for our third annual Editorial Advisory Board meeting for The Institutional Real Estate Letter – Asia Pacific.
The second round of quantitative easing in the United States is expected to have effects beyond the shores of the United States. Commentators writing since the announcement by the Federal Reserve to purchase US$600 billion of assets have considered what the likely effect is on the economic recovery. One of the key questions for us is: “What does that mean for investors in commercial real estate markets in Asia Pacific?”
Whenever an economic or financial shock ripples across the planet, the subsequent recovery often introduces eager new participants and establishes much-needed new rules. From this reconfigured platform, networks and hierarchies often emerge that did not exist before. Two years after the global financial crisis, the landscape for real estate investment indeed appears to be in the process of reconfiguration. Today, Europe, the Middle East and Africa (EMEA) and the Americas each account for about 37 percent of the global stock of “invested” property, which includes properties owned for investment purposes, or about US$4.2 trillion in each region (see “Global Real Estate Market Size,” page 18), according to DTZ.The remaining 26 percent of the global invested stock, or US$3.0 trillion, can now be traced to Asia.
Despite the uncertain economic outlook, there has been a strong rise in mergers and acquisitions (M&A) activity across world markets in recent months. Some deals have gone through, some have failed or been rebuffed, and some are still in play. Various reasons have been put forward for this higher incidence of M&A activity — a return of confidence and a willingness on the part of investors to put their heads back above the parapet, high cash balances and historically low borrowing costs, and a feeling that it’s time to go shopping, to take out competition. But the principal rationale for M&A activity at any level is usually the search for efficiency gains and synergies through consolidation and economies of scale, and efficiency gains often come at a price. Richard Fleming, editor of The Letter – Europe,spoke recently with Mike Gedye, senior director, EMEA Global Corporate Services, at CB Richard Ellis in London, about the real estate implications of current M&A activity.
Tokyo-based Ichigo Group Holdings (Ichigo) has established a new real estate fund that has acquired all shares of an undisclosed property company that owns both operating real estate and land leaseholds. Ichigo Real Estate Investment Advisors Co. Ltd., Ichigo’s 100 percent subsidiary, will manage all of the acquired property firm’s assets — approximately 80 office, commercial, and residential properties and land leaseholds — which are valued at ¥7.3 billion ($88 million).
Red Fort Capital and Parsvnath Developers Ltd.have launched a 464,515 million square meters residential and mixed-use project in the heart of New Delhi. The development project was secured from India’s Rail Land Development Authority (RLDA) for $360 million.
Sydney-based Westfield Group has agreed to sell a 50 interest in the retail component of Westfield Stratford City in London for £871.5 million to a new joint venture between APG of The Netherlands and the C$129.7 billion Canada Pension Plan Investment Board. The transaction values the retail component of Stratford City at £1.743 billion.