With the days of the quick flip and record-setting asset valuations a thing of the past in most regions, many investors are rediscovering the income-producing benefits of real estate over the long term. With fundamentals continuing to improve throughout most of the Asia Pacific region, and office occupancy and rental rates both on the rise, many prime office markets are now shifting from tenant-friendly to landlord-friendly. As a result, some investors have now focused more on core assets with steady, reliable income streams in well-leased buildings. However, the high cost of prime office property in some major markets, as well as a shortage of grade A quality space to purchase, has led some investors to value-added and opportunistic plays.
From the Current Issue
Foreign real estate private equity (REPE) funds started their investments in China about 10 years ago. Their strong recent growth means that the domestic REPE funds denominated in renminbi (RMB) now dominate the industry. There is a lot of interest from foreign investors and fund managers as to investing/managing Chinese RMB-denominated REPE funds. However, the complexity and intricacy of the corporate governance issues seem to be creating much confusion, and therefore reluctance, among those to get involved.
The conundrum facing policy makers in Asia for the better part of 2010 was dealing with a flood of international capital in search of better yields. Since late 2010, policy and investor attention have turned to a by-product of strong economic growth: inflation. Inflationary developments in several Asian economies triggered alarm bells as the rate of price increases exceeded the thresholds of Asian regulators. Policy response has manifested in the form of rhetoric against inflation and actual policy tightening by Asian authorities.
Real estate is a reliable inflation hedge, according to a widely held belief, and investors with real estate assets can sleep soundly, assured that the income they derive from their properties will increase as business activity, salaries, and prices for goods and services increase and companies compete for more space. There have been many studies and articles written on the subject, using complex models and citing historical data. However, those of us who have been paying attention to this subject know that the situation is not that simple and there are many caveats to this belief.
HSBC Specialist Investments, through its interest in HSBC NF China Real Estate Fund, created a second joint venture with subsidiaries of Tesco PLC and the Singapore-listed Metro Holdings Ltd.in a portfolio of three shopping malls in China totaling 2.47 million square feet of gross floor area in the cities of Fuzhou and Xiamenfor approximately US$280 million.