Emerging Trends in Real Estate® Asia Pacific 2011

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TOKYO RECEIVES MIXED RATINGS FOR REAL ESTATE INVESTMENT AND DEVELOPMENT NEXT YEAR, SAYS EMERGING TRENDS IN REAL ESTATE® ASIA PACIFIC 2011
Forecast from ULI, PwC is Promising for Asia Pacific Overall

TOKYO (December 2, 2010) – Tokyo has fair prospects for real estate investment and development opportunities in 2011, according to Emerging Trends in Real Estate® Asia Pacific 2011, a real estate forecast jointly published by the Urban Land Institute (ULI) and PricewaterhouseCoopers LLP (PwC).

Despite some investor reticence about Tokyo and Japan in general, Emerging Trends is optimistic about the overall prospects for the Asia Pacific real estate industry, saying the “cloud has been lifted” from Asia Pacific markets, with the fiscal outlook for most of the Asian countries more promising than that for Europe or the United States. The report, released today in Tokyo, was presented in detail at a dinner of industry leaders by Steven Blank, senior fellow of real estate finance at ULI.

According to the report, “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...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.”

Adds Hiroshi Takagi, PwC Japan Tax Partner, “While some believe that Tokyo might not offer investors the same short-term returns of other markets, Tokyo continues to be the region’s largest real estate market. As a result of its market size and liquidity, investors continue to look for opportunities and we expect Tokyo to receive sizeable allocations from global investors with an Asian investment strategy”.

Emerging Trends 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 based on interviews and a survey of more than 280 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.

Japan’s struggling economy has affected Tokyo’s ratings in the survey, with the city slipping from seventh place for investment prospects in 2010 to 12th place in 2011. Still, the report points to several reasons for optimism regarding Tokyo: 1) an abundance of capital for deals because of extremely low interest rates; 2) increased interest from foreign investors; and 3) a series of Japanese real estate investment trust public offerings. Investors continue to search for opportunities in Tokyo, the report says, because “the bottom has been reached here, whereas the regional assets could still decline a bit.” While survey participants recommended holding most property types in Tokyo, rather than buying or selling, office space was singled out as an attractive property type to buy in the city.

Top Investment Markets for 2011

Emerging Trends rates Singapore, Shanghai, Mumbai, Hong Kong and New Delhi as the top five investment markets for next year:

  • Singapore – 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.
  • Shanghai – 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.
  • Mumbai – 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.
  • Hong Kong – 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. However, more than one-third of the respondents place the retail and hotel sectors in the “buy” category.
  • New Delhi – 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.

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.”

The report is the fifth Asia Pacific edition of the highly regarded Emerging Trends in Real Estate® annual investor survey.

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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 34,000 members representing all aspects of land use and development disciplines.

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