Asia Investors Show Greater Optimism Pointing to a Full Upswing in Real Estate Markets


73% Expected to Expand Their Portfolio; 59% of Investors Eye on Overseas Investment
(Shanghai, Hong Kong and Singapore are Preferred Investment Targets in Asia)

Most commercial real estate markets around the world have passed the bottom and are now on the rise, according to the majority of respondents in the Colliers International Global Investor Sentiment Survey for the third quarter of 2010.  In Asia, investors appear to be even more optimistic with 91% of respondents expressing a desire to buy property in their domestic region, and 73% considering to expanding their property portfolio in the coming 12 months. 

Shanghai in China, followed by Hong Kong and Singapore, were the most-preferred hot spots for Asian investors looking to buy office space over the next 12 months.  Shanghai is on its way of recovery; Hong Kong and Singapore are expected to have further upside in the office sector.  Individual investors reported their intention to pursue residential investment opportunities in second-tier Chinese cities such as Nanjing and Hangzhou.

Moving from 6 o’ clock on the global property clock in 1Q, the average time today according to Asian investors is slightly past 7 o’ clock.  In the coming 12 months, the Asian market is predicted to have moved towards between 8 and 9 o’ clock. And in both cases, the greatest number of respondents sees the market growing at an even faster rate.

“The survey shows that Asian investors are confident on the macro-fundamentals in the region,” said Piers Brunner, chief executive officer, Asia. “Personal and corporate debt levels are low.  Interest rates are low and liquidity is high. Optimism in the market is reinforced by 75% of respondents in Asia saying a double-dip recession is unlikely.”

However there are concerns among Asian investors, such as the uncertainties on government policies to cool the overheated markets, change in market liquidity and interest rate increases.

MORE ASIAN INVESTORS EXPECT TO EXPAND THEIR PORTFOLIO

Looking ahead to the next 12 months, the largest group of Asian investors (73%) expect to expand their property portfolio.  This figure was higher than the 65% registered in 1Q 2010.  The next largest group of respondents (18%) expect to rebalance the size of their portfolio over the coming year.

STRONG DESIRE TO BUY PROPERTY IN ASIA

The desire to buy property in Asia among Asian investors continues to rise.  91% of respondents expressed a desire to buy property in their domestic region, compared to 78% in 1Q 2010. The high percentage can be explained by the growth expectations in Asia, primarily driven by the Chinese market. 

While globally only 30% of respondents considered investments outside their domestic markets, 59% of respondents in Asia reported a desire to buy overseas properties. They would prefer Sydney office and Brisbane retail assets in Australia.  Others think office properties in New York and Chicago would offer good market entry points amid the prevailing low real estate prices.

NEW OPTIMISM POINTS TO AN UPSWING IN REAL ESTATE MARKETS ACROSS THE WORLD

Globally, the largest group of survey respondents put the Global Property Clock for their particular regions at eight o’clock, with the second and third largest groups at six and seven o’clock, respectively. These responses indicate that most markets globally are on the upswing and are characterized by rising demand, falling availability and vacancy and rising headline rents. This marks a significant move from Colliers International’s last Investor Sentiment Survey conducted in Q1 2010, when most respondents placed their markets at between five and six o’clock.

 

Some additional key global findings of Colliers International’s Q3 2010 Global Investor Sentiment Survey include:

  • 90% of respondents said they planned to expand their current level of real estate holdings within a year or maintain them at current levels.
  • New York, Chicago, San Francisco, Washington, London, Sydney, Singapore and Hong Kong were listed as key cross-border investment destinations. Emerging markets mentioned include Poland, Ukraine and Brazil.

Nearly 80 percent think debt will be easier to access in the next 12 months. Respondents who said they believe the cost of debt would rise in the next 12 months fell slightly from the first quarter of 2010, with 44 percent predicting an increase versus 52 percent six months ago.

KEY REGIONAL FINDINGS

  • In Western Europe, 62% of respondents now intend to make cross-border investments, a notable increase from the figure of 30% for Q1 2010.
  • In United States, a significantly greater proportion of investors (65%) indicated they are considering selling property over the next 12 months versus the Q1 2010 response of 23 percent.
  • In the next 12 months, fewer Pacific (Australia and New Zealand) investors (46%) expect to expand their property portfolio compared to the 68% who expected to expand in Q1 2010.
  • Among investors from the Middle East and Africa, 63% stated that they would be looking to actively reduce risk levels, with 25% indicating they would look to increase the diversification of their portfolio, implying an overall degree of risk management.
  • Across Central and Eastern Europe, the range of locations being targeted by investors was quite diverse, although Warsaw remains the most popular destination, notably for office product. Other popular targets quoted were Kiev, Prague, Moscow and Bucharest.

Among Latin American investors, 69 percent of those surveyed reported they will not reduce their risk levels.

  • 67 percent of the investors surveyed in Canada think that prime effective rents for the office market will either hit bottom by Q2 2011 or have already hit bottom. In the industrial market, 78 percent of investors think the bottom has either been reached or will be reached by Q2 2011 and that percentage jumps to 83 percent for retail.

Moving from 6 o’ clock on the global property clock in 1Q, the average time today according to Asian investors is slightly past 7 o’ clock.  In the coming 12 months, the Asian market is predicted to have moved towards between 8 and 9 o’ clock. And in both cases, the greatest number of respondents sees the market growing at an even faster rate.

 

“The survey shows that Asian investors are confident on the macro-fundamentals in the region,” said Piers Brunner, chief executive officer, Asia. “Personal and corporate debt levels are low.  Interest rates are low and liquidity is high. Optimism in the market is reinforced by 75% of respondents in Asia saying a double-dip recession is unlikely.”

However there are concerns among Asian investors, such as the uncertainties on government policies to cool the overheated markets, change in market liquidity and interest rate increases.

 

MORE ASIAN INVESTORS EXPECT TO EXPAND THEIR PORTFOLIO

Looking ahead to the next 12 months, the largest group of Asian investors (73%) expect to expand their property portfolio.  This figure was higher than the 65% registered in 1Q 2010.  The next largest group of respondents (18%) expect to rebalance the size of their portfolio over the coming year.

 

 

STRONG DESIRE TO BUY PROPERTY IN ASIA

The desire to buy property in Asia among Asian investors continues to rise.  91% of respondents expressed a desire to buy property in their domestic region, compared to 78% in 1Q 2010. The high percentage can be explained by the growth expectations in Asia, primarily driven by the Chinese market. 

 

While globally only 30% of respondents considered investments outside their domestic markets, 59% of respondents in Asia reported a desire to buy overseas properties. They would prefer Sydney office and Brisbane retail assets in Australia.  Others think office properties in New York and Chicago would offer good market entry points amid the prevailing low real estate prices.

 

 

NEW OPTIMISM POINTS TO AN UPSWING IN REAL ESTATE MARKETS ACROSS THE WORLD

Globally, the largest group of survey respondents put the Global Property Clock for their particular regions at eight o’clock, with the second and third largest groups at six and seven o’clock, respectively. These responses indicate that most markets globally are on the upswing and are characterized by rising demand, falling availability and vacancy and rising headline rents. This marks a significant move from Colliers International’s last Investor Sentiment Survey conducted in Q1 2010, when most respondents placed their markets at between five and six o’clock.

 

 

Some additional key global findings of Colliers International’s Q3 2010 Global Investor Sentiment Survey include:

  • 90% of respondents said they planned to expand their current level of real estate holdings within a year or maintain them at current levels.
  • New York, Chicago, San Francisco, Washington, London, Sydney, Singapore and Hong Kong were listed as key cross-border investment destinations. Emerging markets mentioned include Poland, Ukraine and Brazil.

Nearly 80 percent think debt will be easier to access in the next 12 months. Respondents who said they believe the cost of debt would rise in the next 12 months fell slightly from the first quarter of 2010, with 44 percent predicting an increase versus 52 percent six months ago.

 

KEY REGIONAL FINDINGS

  • In Western Europe, 62% of respondents now intend to make cross-border investments, a notable increase from the figure of 30% for Q1 2010.
  • In United States, a significantly greater proportion of investors (65%) indicated they are considering selling property over the next 12 months versus the Q1 2010 response of 23 percent.
  • In the next 12 months, fewer Pacific (Australia and New Zealand) investors (46%) expect to expand their property portfolio compared to the 68% who expected to expand in Q1 2010.
  • Among investors from the Middle East and Africa, 63% stated that they would be looking to actively reduce risk levels, with 25% indicating they would look to increase the diversification of their portfolio, implying an overall degree of risk management.
  • Across Central and Eastern Europe, the range of locations being targeted by investors was quite diverse, although Warsaw remains the most popular destination, notably for office product. Other popular targets quoted were Kiev, Prague, Moscow and Bucharest.
  •  Among Latin American investors, 69 percent of those surveyed reported they will not reduce their risk levels.
  • 67 percent of the investors surveyed in Canada think that prime effective rents for the office market will either hit bottom by Q2 2011 or have already hit bottom. In the industrial market, 78 percent of investors think the bottom has either been reached or will be reached by Q2 2011 and that percentage jumps to 83 percent for retail.

 The Colliers International Q3 2010 Global Investor Sentiment Survey was conducted from August 15 to September 7, 2010. Major institutional and private investors across the globe participated. The primary purpose of the survey is to better understand global investor attitudes in the current marketplace at a global and regional level, including investors’ outlook for the coming 12 months.

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