Archive for April, 2012

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Office Vacancy Rate At 20-year Low – What Does It Mean?

Monday, April 30th, 2012

The possibility of Hong Kong running out of office space has always been a topic in my conversations with corporate clients in recent years. Many of these clients started to raise their concerns over Hong Kong’s tight availability of office space a few years back when they saw the city’s overall vacancy rate sitting below the 5% mark, and this was right before the Global Financial Crisis (GFC). They knew, that if the situation was not going to improve, it would affect their future expansion plans.

Since then, unfortunately, the situation has remained largely unchanged, with the city’s overall Grade A office vacancy rate in March squeezed down further to 3.8%. This is not only lower than the level before the GFC, but the lowest in the last 20 years. And yes, such a squeeze is on the back of a gloomy economic environment where corporate expansion demand is not as strong as in recent years.

The times when there were many cheap options in decentralised sub-markets have gone, with vacancy rates in Kowloon East now also down to just over 5%. Although there is some returned space in Central, it is concentrated in a couple of more expensive buildings and does not really meet the appetite of tenants in these uncertain times. The other sub-markets, such as Wanchai/Causeway Bay, Hong Kong East and Tsimshatsui all have vacancy rates below 3%.

I have no crystal ball to tell me exactly when the global financial markets will be restored to health and when there will be a more structural rebound in growth. However, if there are some improvements from next year onwards, as many economists believe there will be, such a low vacancy environment is set to push office rents up further.

This year, we expect to see rents softening with a more noticeable fall only in Central. The rest of the sub-markets, where vacancies are extremely low, will see only very marginal downward rental pressure or, in the case of Kowloon East, some further upward trend. Any downward pressure would be attributable only to a lack of new or expansion demand and not really because of any market contraction. This is very different from the previous down-cycles when there was negative net take-up in most sub-markets.

The shallower rental fall projected this time around compared with the previous down-cycles is very much due to such a low vacancy environment. Although demand for sizable and pricy space is thin and certain buildings in Central with high vacancies will be affected, the lack of leveraging opportunities for tenants in the rest of the market will help prevent rentals from going into free fall.

Is this good for Hong Kong? I guess an immediate answer from office landlords would be ‘yes’, but I do not see this situation as too healthy for Hong Kong as a whole. A lack of office space will not only limit business/economic growth in the long run but will affect Hong Kong’s position as one of the world’s major financial centres.

About the author
Marcos Chan is the Head of Research for Jones Lang LaSalle in Greater Pearl River Delta, based in Hong Kong.

Posted in Hong Kong, Office Research | No Comments »

New Era For Office Market In Central China?

Friday, April 27th, 2012

The signs were hardly subtle. For years, there have been talks about the inland advantages – policy support, labour and resource endowment, improving infrastructure – tilting economic growth from the coastal areas and toward the central and western regions.

Chengdu, now amongst the most mature and economically diverse tier 2 cities – so much so that our China50 report calls Chengdu the top Tier 1.5 city! – was the vanguard during the Go West (Inland) movement which began in 2000. For the past three years, it has been the darling of multinationals and property developers. As of 2012H1, Chengdu remains by far the city with the largest Grade A stock amongst Tier 2 and 3 markets and a key market where almost all renowned property developers, domestic and foreign alike, are active.

In line with its impressive economic development, office rents in Chengdu grew quickly in 2010 and 2011. While office demand has not shown signs of slowing, now supply has largely caught up, giving tenants a breather from the double-digit rental increases since 2010.

While attention from foreign investors and developers has largely been concentrated on Chengdu, new expansion demand has finally taken off in Central China, with Wuhan quietly emerging as one of the only China Tier 1.5 cities where we’re forecasting rental growth north of 15% in 2012, after a stunning increase of over 20% in 2011.

So what is at play here causing the relatively nascent Wuhan office market to suddenly…. wake up?

A few powerful factors converged: policy support, economic development, and pent up demand for office development.

• After establishing a western hub, an increasing number of MNCs and foreign institutions have finally turned their attention to Central China. Demand from new business set-ups, which began emerging in 2010H2, is proving to be a small, but growing trend for the city.

• The local economy is domestically-driven and is taking off, with no notable impact from the global economic slowdown that has been causing companies to hold off expansion plans in the more internationally-exposed YRD cities, such as Hangzhou.

• Starved of high quality supply through 2010H1, pent-up (upgrade and expansion) demand drove much of the net absorption and rental increases over the last two years. Also, supply from new completions which handed over in 2010-11 still hasn’t caught up with the surge in demand.

The confluence of these factors has given landlords of Wuhan’s Grade A office buildings pricing power that should enable them to enjoy double digit rental growth for the next several years. It’s a good spot to be in, at least until supply catches up in 2014.

For more detailed analysis on Wuhan Office Sector, check out the China Real Estate Intelligence Service report for Wuhan Office 1Q12.

About the author
Amy Pan is an Associate Director in Research and heads up Real Estate Intelligence Service (REIS) China for Jones Lang LaSalle. She is based in Shanghai.

Posted in China, Office Research | No Comments »

A-REITs: A Case For Cautious Optimism

Wednesday, April 25th, 2012

The impact of the global financial crisis (GFC) on Australia’s Real Estate Investment Trust (A-REITs) sector has been significant. At the peak of the market in late-2007, the S&P/ASX200 A-REIT Index reached 1,910 points, its highest level on record. As global economic conditions rapidly deteriorated the index fell by a staggering 70%. This compares to the broader S&P/ASX 200 Index which fell by 40% over the same period. At the end of Q1/2012, the S&P/ASX200 A-REIT Index was still 57% below its 2007 peak.

Many reasons account for the poor performance of A-REITS during this period; too much debt, paying out unsustainably high dividend yields, paying expensive management fees and sourcing earnings from more volatile income streams such as development, funds management and less familiar overseas markets. Prior to the GFC many of Australia’s major listed property trusts followed the trend of the broader investment management industry, adopting more aggressive strategies that relied on earnings growth rather than rental income.

A-REITs continue to trade at an average discount of around a 10% to their net tangible assets as investors remain cautious about the outlook for this sector. However, over the past two years most A-REITs have restructured their balance sheets and reviewed their business strategies in response to the impact of the GFC.

We believe that there are three key reasons to remain optimistic about this sector moving forward:

• Gearing – During the mid-1990’s the A-REITs had an average gearing level of around 10%. This figure grew substantially to around 40% by the end of 2007. As asset values collapsed and debt markets froze globally the A-REITs undertook substantial equity capital risings to re-capitalise their portfolios. Average gearing levels are now estimated at around 30%.

• Offshore Versus Domestic – Over the past two years (2010-2011), Australian investors have divested around AUD 14.9 billion worth of offshore assets. This is the largest offshore liquidation by any other country by a significant margin. Prior to the GFC, A-REITs had significantly increased their exposure to international markets as managers shifted investment strategies to focus on opportunities abroad. Many of the major listed property trusts have now either completed or are in the process of selling down their offshore portfolios with a view to focusing on core domestic markets. This will ensure more conservative investment strategies for both managers and investors moving forward.

• Australia’s Economic Outlook – The outlook for the Australian economy remains strong. Deloitte Access Economics (March 2012) forecasts 3.3% growth in the Australian economy in 2012 and 3.4% in 2013. While growth may be uneven across sectors and regions, the fundamentals underpinning Australia’s economic outlook are strong and will help drive commercial property markets over the next few years.

The growth prospects now look promising for commercial real estate and for the listed property sector. With Australia’s economic outlook remaining strong we expect less volatile times ahead for investors in both listed and unlisted investment vehicles.

About the author
Luke Prokuda is a Research Analyst for Jones Lang LaSalle, based in Brisbane, Australia.

Posted in Australia, Investment Research | No Comments »

The Changing Residential Landscape In Metro Manila

Tuesday, April 24th, 2012

If you’re in Metro Manila, you would have to be blind not to see the numerous high-rise residential condominiums being constructed. From a little more than 7,000 condominium units completed at the beginning of the millennium, the number of condominium units in Metro Manila jumped to roughly 90,000 by end-2011. The annual new supply of condominium units started growing sharply around 2005. From then until 2011, supply growth has averaged more than 30% annually.

However, we don’t think that the current growth spurt is over yet. From 2012 to 2016, more than 200 residential condominium projects are expected to be constructed, which will produce approximately 120,000 housing units. This means that an average of 24,000 units is scheduled for completion each year for the next five years. Despite this massive volume of incoming residential supply in Metro Manila, developers have remained optimistic and some have plans to launch even more residential projects. Thus, the forecast supply of 120,000 residential units may go even higher in the coming months.

Figure 1. Cumulative Supply of Mid- to High-End Condominiums in Metro Manila

Note: Mid-end condominium units generally have selling prices ranging from PHP 1.5 million to PHP 10 million, while high-end condominiums typically have prices above PHP 10 million.

Source: Jones Lang LaSalle Leechiu Research & Consulting

With the large number of condominium developments in Metro Manila, competition among developers, as a result, has become more intense. In order to attract buyers, developers have employed several measures including adding unique features or using international brands in the projects. Unique features may include incorporating “green” technology into the development. Meanwhile, international branding of residential projects has somewhat become a trend in recent years. For one, the Shangri-La Hotels brand entered the residential condominium scene with its first development, Shang Grand Tower, in Makati CBD back in 2006. Now, there are two existing Shangri-La branded condominiums, with three more on the way. Other upcoming international branded condominiums include the Raffles Residences, the Trump Tower Manila, and the planned Grand Hyatt residential tower.

Other measures used by residential developers to secure buyers include offering discounts and more flexible payment schemes. Currently, discounts usually range from around 2% to 10% depending on the buyer’s payment scheme, but can go as high as 20%. Some developers even offer discounts of up to 40% of the total selling price. As well as discounts, payment schemes can be a major deciding factor for buyers. Previously, downpayments on condominium purchases ranged from 20%-30%, however, now downpayments range from 10%-20%, with some developers offering no downpayment schemes. These are just a few of the new trends spreading through the market right now.

The residential condominium landscape in Metro Manila has changed significantly in the last ten years. The residential condominium supply has grown tremendously in the past decade and is expected to more than double in the next five years. Condominiums have become more affordable to the middle-income market and competition among developers has increased. But the change in the landscape is not over yet, as the residential condominium market in Metro Manila continues to evolve further.

About the author
Jessica Mae Go is a Senior Research Analyst for Jones Lang LaSalle in Philippines, based in Manila.

Posted in Philippines, Residential Research | 2 Comments »

Riding Tianjin’s Retail Boom

Friday, April 20th, 2012

Despite inflation concerns and a suppressed residential and financial market, Tianjin has maintained a rapid retail sales growth rate. Tianjin retail sales of consumer goods have seen double digit growth since 1995, and are forecasted to grow at around 16% per year from 2012 to 2015. Coupled with the growing middle class whose personal wealth has also risen, domestic and international retailers are eager to expand into Tianjin.

Opportunities:
Rising incomes, changing consumer behaviours and the construction of new retail malls continue to contribute to a rapidly-evolving retail landscape in Tianjin.

Tianjin’s retail market is currently undergoing a transformation, moving away from traditional department stores to large-scale integrated shopping malls. In the past, the predominant retailers in Tianjin were large department stores like Youyi Department Store which is government-owned and caters to a very specific clientele where both its operator and consumers are only partial to luxury retailers. However, as the middle class burgeons and becomes the mainstream consumer in Tianjin, the city has started to adapt to this new trend with more than 700,000 sqm of shopping mall platform retail projects entering in the next few years. To respond to the changing demographics with rising incomes, better education, and urban living, shopping malls in Tianjin are opening their spaces to more foreign and smaller-format retailers like i.t., Uniqlo and Gap. Some of these projects include Joy City, Aqua City, and the Metropolitan by Hutchison Whampoa.

Issues:
The biggest challenge for these large retail complexes entering is how to build a sustainable and leading position in Tianjin riding the growth tide. Hard lessons have been learned by many investors that have entered Tianjin.

Not all retail projects will be able to achieve international standards. Some of these large scale projects are completed in haste to meet government required deadlines for market entry. Due to time constraints, some are poorly planned or lack sophistication in management. For example, a local partner in a joint-venture project in Tianjin’s Nankai district wished to repatriate its investment, and as a result, portions of the project were strata-title sold without planning, which discouraged more qualified tenants from entering the project. No considerations were placed on the overall project tenant mix. Secondly, as consumers and markets vary greatly across regions, a successful retail mall concept from elsewhere cannot simply be replicated here. Failed examples include outlet malls developed or planned in the Tianjin Airport Economic Area, Tuanbo Lake, and Tianjin Port Free Trade Zones, where these assets all have now gone bankrupt, been cancelled, or plagued by an inability to attract tenants due to their location, operation strategy, etc.

The macro-economic performance and the changing demographics in Tianjin all support a positive investment market, but various risks do exist for international investors. It will be crucial for investors to lay out a storybook for themselves, first defining geographies, market segments, categories, and secondly a detailed due diligence process of the market and local partners to ride the growth wave in Tianjin.

About the author
Alice H. Chen is the Head of Research and Strategic Consulting for Jones Lang LaSalle in Tianjin, China.

Posted in China, Investment Research, Retail Research | No Comments »

Maximum City, Maximum Use Of Space

Thursday, April 19th, 2012

The city of Mumbai has an uncanny knack of pushing everything to the limits, and it certainly does so for optimally utilising its every square foot of space surrounded by the sea from three sides. Mumbai teaches its citizens to be focused on one’s own work by remaining oblivious to what happens just an arm’s length away and like a true Mumbaikar, Mumbai’s spaces radiate dynamism in making numerous activities happen on a time share basis!

Mumbai’s suburban train stations are surely the world’s most vivid spaces. Every single day their spill-over nooks and corners are time share offices, relaxing areas, communication hubs, retail joints, food spots, business centres, logistics points and what not! The foyers and enclosures are greeted by the vendors of perishable goods at 3 am and for the next hour or two one can see a flawless, well lubricated distribution of their goods to retailers who will take the goods door to door, neighbourhood to neighbourhood.

With sunrise, also emerging on the horizon are hundreds of high school and college students on their way to schools, colleges and private coaching institutes. Where else in the world would schools decide on their timing based on the need to beat the morning rush hour! People not belonging to Mumbai often find it crazy to see college rush hour dawning as the sun emerges but soon they sink into their own memory lanes once among the sea of young hearts.

What follows next is a march past by office goers; men and women, rich and poor, bankers and carpenters, engineers and clerks, sales girls and fashion designers all forming an order like a never ending parade of ants coming in and out with precision personified. About 10,000 people walk past 1,000 sq m access controls in less than 6 minutes, if they fail, the next batch of people drifts them away in no time.

Office goers gone, the place assumes a relaxed mood. This is when it is at its productive best. Diamond dealers do trade worth millions of bucks, medical representatives master the art of symbiosis, interviews happen and candidates are selected, real estate agents broker deals, courier services sort out their mail, insurance agents solicit their clients and by now it is time to make way for the food stalls. Mumbai’s famous Dabbawallas (tiffin carriers) are ready for their final leg to the offices, people emerge from all sorts of bee hives for lunch and hundreds of food stalls dishing out most cousins of India rule the station area for the next couple of hours.

Come afternoon and the place turns gentle and caring for those who seek solitude, who seek their beloved’s company for some magic moments of love, affection and romance. This does not last long, for it is time for the petty retailers to set up their shops selling novelty items and daily needs to thousands of commuters who have no time for shopping and truly, this is “convenience shopping” for them on their way home in the evenings. Trading density during evening hours in suburban station areas of Mumbai is easily ten times that during crowded weekends at any malls and the kind of high rent retailers pay for this time slot is often two times higher than that for a popular high street.

The buzz finally starts receding around 10 pm when the hard working work force is making its journey back after doing “overtime”, friends catching up and hanging out, plans being made for the late night movie, the suburban station starts wearing its humane cap in providing the less privileged their shelter for the night. Mind you, it will be merely three hours of peace as the railway house keepers and gangmen do their daily repairs and maintenance, and there will be yet another busy day for all of Mumbai’s suburban railway stations! An ordinary Mumbaikar’s rightful public space for the tax he pays.

About the author
Ashutosh Limaye is the head of Research and Real Estate Intelligence Service, for Jones Lang LaSalle in India, based in Mumbai.

Posted in Demography, India | No Comments »

High Land Premium Hinders Office Supply in Kowloon East

Wednesday, April 18th, 2012

One of the interesting characteristics of property development in Hong Kong is that the use is defined by the underlying land lease rather than the type of building that is built upon the land. This has led to the development of a large number of curtain-walled buildings that look and serve as office buildings but are still defined as being industrial buildings. The use of these buildings as offices, however, technically comes with restrictions (e.g. the tenant must be from the industrial sector, or only a portion of the floor area can be used as an office).

Developers can remove these restrictions on building use by payment of a land premium; usually agreed to before development. However, the high land premium charged for lease modifications (i.e. from industrial to commercial use) brings many difficulties. In recent years, office prices have been rising at a faster pace than those of industrial buildings, widening the price gap between the two. In Kowloon East, one of the city’s former industrial enclaves, the average premium charged to modify the land-use in a lease has increased from about HKD 1,000 per sq ft in 2010 to about HKD 1,800 per sq ft in 2011. Based on my understanding, the premium is asking at about HKD 2,500-3,000 per sq ft more recently.

Moreover, with the prices of new industrial buildings climbing steadily, there is even less incentive for developers to consider lease modification. New high quality industrial buildings in other districts, such as CEO Tower and Grandion Plaza in Cheung Sha Wan, One Midtown and King Palace Plaza in Tsuen Wan, are currently transacting at about HKD 4,000-5,000 per sq ft. Based on these transactions, I believe that a brand new industrial building with decent finishes in Kowloon East could achieve at least HKD 5,000 per sq ft.

Developing industrial buildings for office use, however, is not without risks. Apart from market risks associated with any development project, demand can also be affected by stricter enforcement of user clause in government lease. Broadly speaking, industrial buildings are not meant to be used exclusively for office purposes without first obtaining permission, usually in the form of a lease modification (on an en bloc basis only) or a waiver (on an en bloc or individual unit basis), from the Lands Department. Whilst the introduction of the nil waiver fee conversion policy by the government has provided owners of some older industrial buildings to legitimise the use of their buildings for office use, this policy measure is not applicable to newer developments with building age less than 15 years.

A bulk quantum of the future Grade A office space under the government’s CBD2 plan will be coming from redevelopment of underutilised industrial buildings. Should the government wants to speed up the pace of the emergence of Kowloon East into Hong Kong’s next generation CBD, I reckon more creative ideas towards land use conversion is needed.

About the author
Frank Ma is the Manager of Research for Jones Lang LaSalle in Hong Kong.

Posted in Hong Kong, Office Research | No Comments »

The Case Of Risk-Adjusted Returns In HCMC Landed Housing

Monday, April 16th, 2012

When Indochina Capital introduced their newest villa project in Ho Chi Minh City (HCMC) in late 2011 amidst a property market downturn, I began to think the landed housing sector in the city might appear on the radar of institutional investors. Over the past few months, I have found out that investors are indeed viewing this sector favourably due to its limited supply pipeline and niche target market.

Apparently, it is not just landed housing that is on investors’ radar. In fact, it is not just real estate, as numerous opportunities may arise in times of economic downturns when valuations become attractive. This has probably been the case in the equity market, for example. As a matter of fact, M&A deals in Vietnam in 1Q12 totalled USD 1.5 billion, the eighth highest in Asia Pacific ex-Japan, according to Thomson Reuters.

So how has real estate (and landed housing in particular) performed compared with equities? This question prompted me to take a quick look at comparing risk adjusted returns among these types of investments.

I started with proprietary Jones Lang LaSalle quarterly data on average prime condominium and villa prices, together with quarter-end closing price levels of the VN-Index – Vietnam’s benchmark stock index comprising companies listed on the Ho Chi Minh City Stock Exchange. The time period chosen starts from 4Q06 (when Vietnam’s accession into the WTO was approved) to 1Q12. This set of raw data is then used to calculate time-series data of annual returns that could have hypothetically been realised at quarterly intervals. “Returns” in this context refers purely to capital gains in local currency terms and ignores dividends and rental income.

Figure 1 below shows that the VN-Index during the stock market’s heyday yielded the highest rate of annual return, but also yielded the lowest return seen in the time period studied. On average, returns on villas were the highest at over 20.0% per annum.

Figure 2 below further shows that annual returns in the villa sector have the lowest standard deviation – a measure of risk. Combined with the previous findings, the villa sector is found to have the highest Sharpe ratio – a measure of risk-adjusted performance.

While there are lots of caveats to this mini study (e.g. returns only incorporate capital gains, transaction costs are not accounted for, the Sharpe ratio in its simplified form assumes a constant risk free rate, etc), I am hopeful this is a good starting point to further examine this topic. We may also extend this to include returns on commercial real estate when capital value data in this sector become more readily available.

For now, we know that Indochina Capital did their homework.

About the author
Trung Thai is the Manager of Research in Vietnam and is based in Ho Chi Minh City.

Posted in Finance, Investment Research, Residential Research, Vietnam | No Comments »

Senior Living

Friday, April 13th, 2012

Senior living is popular in Western countries and the trend has started here in India, too. In Indian religious texts, we note that the third stage of life is VANAPRASTHANAM, i.e. after you have fulfilled your worldly duties, you are expected to move out of your young ones’ lives; ultimately, the fourth stage, SANYAS, is to become detached.

The fading joint family system, combined with a steadily increasing life expectancy, has boosted financial independence and the urge to live on one’s own with dignity has given rise to the concept of senior living homes, inspired by the West, in the country.

According to Census of India projections, the elderly as a percentage of India’s total population will jump from 7.4% in 2001 to 12.4% in 2026 and touch 19.7% in 2050. In 2011, India had about 76 million seniors over the age of 60 and this figure is expected to grow to 173 million by 2025, and increase further to about 240 million by 2050. This marked increase in the elderly population will involve a change in an important sociological figure, the “old age dependency ratio”. Interestingly, by 2050, it is estimated that the number of dependent adults in India will be almost the same as the number of dependent children.

In contrast to senior living in the West, the concept of housing for seniors as a specific asset class in India continues to have some social stigma associated with it, although there is a growing realisation among urban households, which have witnessed a marked increase in nuclear families over the past 20 years, that families are no longer equipped to take care of their aged family members. In this changing social environment, concepts such as contemporary retirement homes are becoming both accepted and popular.

Demand for senior living comes from a variety of customer segments with varying needs and wants. However, the need for better healthcare in old age, secure surroundings and a social support system designed to take care of the senior are the prime drivers of demand for such assets.

With the recent relaxation of FDI restrictions on investments in this sector and a population of seniors to cater to over the coming decades, there clearly exists an untapped opportunity for investment and development in this sector. Unlike in Western countries, where the senior living industry is mature, India provides developers, service providers, healthcare players and operators with the opportunity to create solutions that are specific to India, while leveraging experience gained around the world.

There has been a marked increase in the number of senior living projects over the past five years in line with growing acceptability and demand in the sector. Private entities that have already made a foray into the sector include the Ashiana Group of Builders, Paranjape Schemes, Impact Senior Living Estate, Covai Properties, the Brindavan Senior Citizen Foundation and Classic Promoters, among others. Their projects are already operational in such major cities as Delhi, Pune, Bangalore, Amritsar, Coimbatore and Chennai.

About the author
Srinivasa Reddy is the Manager, Research for Jones Lang LaSalle in India, based in Bangalore.

Posted in India, Residential Research | 1 Comment »

Global Transactional Volumes Hit US$75 Billion In Q1 2012

Thursday, April 12th, 2012

The preliminary Q1 2012 transactional numbers are in and they show a subdued start to the year compared to the end of 2011. However, the quieter first quarter is on the back of further upward revisions to our 2011 Global Capital Flows.

The fourth quarter of 2011 turned out to be the busiest quarter of the year, even though it marked the time of greatest uncertainty in the global economy with the sovereign debt crisis in Europe at its peak. Our final Q4 2011 volumes have reached US$112 billion, an upward revision of US$10 billion on our previously reported figures. This helped 2011 become the fourth most active year on record at US$418 billion. It is maybe no surprise then that the first quarter of this year has got off to a slightly quieter start. Our preliminary numbers are indicating that US$75 billion worth of commercial property was traded in the first quarter of 2012. The US$75 billion is also slightly lower than the first quarter of 2011, when significant one off deals in the UK and Brazil in particular increased transactional activity significantly. So what do we expect for the remainder of 2012?

The last two years has been all about investors deploying capital into the large, liquid cities of the world such as London, New York, Paris, Hong Kong and Tokyo and searching for the best assets in these cities. This has inevitably had an effect on pricing with yields compressing significantly, particularly in the retail and office sectors. Given the more limited stock available in prime markets and with the global financial system in better shape, we expect an increase in transactional activity in secondary markets and more portfolio deals as we move through 2012.

This improvement will not be synchronised to any great degree globally, but the injections of liquidity that we have seen from central banks are beginning to have an effect, with debt financing slowly improving, although it is still more difficult in Europe than in other regions. While many banks have been focusing on disposing of their non-performing commercial property loans, we believe there will be a greater supply of direct commercial property from this source in 2012.

Given this outlook we have maintained our forecast that volumes will be around the 2011 levels of circa US$400 billion. For volumes to dramatically outperform 2011 we would need to see the debt markets improve significantly, including CMBS issuance outside of the US, which the preliminary results of 2012 are not indicating has occurred to any great degree, yet.

About the author
David Green-Morgan is Global Capital Markets Research Director, based in Singapore.

Posted in Americas, Asia Pacific, Capital Markets, EMEA | No Comments »

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