LONDON, Oct 21 (Reuters) – The worst of the global
commercial property meltdown is over, although the recovery will
be uneven as rebounding markets in Asia and Europe contrast with
more subdued U.S. conditions, a report said on Wednesday.
The rally is supported by the improving global economy,
investor sentiment, market liquidity and corporate balance
sheets, Jones Lang LaSalle Inc <JLL.N> said in the report.
Asia’s real estate market is leading the rebound, benefiting
from a quicker-than-expected economic turnaround, while Europe
is also seeing stronger investor interest, the property advisor
Even the CEO of Growthpoint, South Africa’s largest listed property firm, feels the continent (excluding South Africa) is not for the faint-hearted. Those interested in investing for the longer term, like himself, are likely to remain on the sidelines for now. “We’re less convinced about the dynamics in some of these African countries. It is higher returns for that risk, but we’re not convinced that it’s enough,” says Norbert Sasse, while in London for an investors’ conference organised by Australia’s Macquarie Bank.
“We’re sceptical with those African countries further north. Nigeria, Uganda, Kenya, Rwanda etc … you’re never sure if the law protects your property rights. The law around property title is certainly nowhere near as advanced as you would get in South Africa.”But others are more optimistic. Knight Franks’ head of Africa Peter Welborn told a Reuters Summit in June that Africa opportunities were just as good if not better than other emerging markets such as Asia and Latin America, promising hefty returns.Growthpoint is the landlord for some 440 commercial properties in South Africa, but owns just two buildings in the rest of the continent, in neighbouring Namibia.”We’re not unhappy with our properties in Namibia, but we’re not necessarily long-term holders,” Sasse says, adding those were inherited as part of Growthpoint’s past portfolio purchases. Instead, the company is casting its net much further afield to Australia, where he says its new property unit could spend A$2 billion on acquisitions over the next two years.
The old adage – there is no better time to go back to school than during a recession – seems to ring true for real estate investments as well.******With recession-wary workers and rising international interest driving up university applications, student home operators in the UK are enjoying near 100 percent occupancies, with rents predicted to go up 10 percent this year.******In contrast, other property classes in the UK such as offices, shopping malls and factories have seen values plunge a startling 45 percent since mid-2007. And the recession means rents are forecast to fall as much as 15 percent this year as landlords face the rising threat of tenant defaults.******As I wrote earlier, investors such as pension funds that were burnt by traditional commercial assets are now turning to the student accommodation market for the projected growth and steady returns other parts of the market aren’t delivering.******
People packing their bags and flying out to St Petersburg, Warsaw, and Prague this summer may not just be seeking an exotic vacation spot.International property investors are inching back to emerging Europe, lured by prospects of higher returns in markets such as Poland, whose economy has held up relatively well in a global downturn, and Russia, which is bolstered by rising crude oil prices.After posting strong growth for over 5 years, commercial real estate investments in emerging Europe had been a washout after Lehman Brothers’ collapse in Sept ‘08, with first quarter sales hitting a record low.As our Moscow-based property reporter Yuliya Komleva and I wrote , major property fund managers such as Germany’s DekaBank, UK’s Aberdeen, and Hines from the United States have again looking for big buys in the region, although Hungary, Ukraine and the Baltics remain largely no-go zones.Aberdeen Property Investors’ managing director for Russia, Charles Voss, even compared Russian cities favourably against London, where the once-booming UK financial services industry has been weakened by the global financial crisis.”They don’t anticipate all those jobs to come back immediately so the demand for office space will be weak (in the UK). Even though they are starting to get to the bottom, the growth curve in terms of additional value can be less than what can be in found Russia,” says Voss, who sits in Russia’s cultural and historical capital of St Petersburg.With property prices diving and driving up yields in London however, investors are looking to squeeze higher returns in emerging Europe, says Jones Lang LaSalle (JLL) head of CEE Capital Markets & Investment Tomasz Trzoslo.(This JLL graphic illustrates European office yield movement in the past year)“If you can buy in London for 6-7 percent, why buy in Central Europe? Central Europe needs to trade at a yield premium—my guess about 150-200 basis points,” Warsaw-based Trzoslo argues.