Rental and capital value growth strengthens to 3% across Asia Pacific’s office market

Aggregate net take-up in office space across major Tier I markets reaches more than double the level of the previous year

SINGAPORE, February 1st 2010 – New research from Jones Lang LaSalle reveals that positive business sentiment and solid corporate hiring are buoying leasing demand in the office markets of Asia Pacific. In 2010, aggregate net take-up across major Tier I markets was more than double the level of the previous year.

Vacancies have stabilised or started to trend down in many cities and more markets moved to the upturn phase of the rental cycle in 4Q10. Of the 26 featured office markets, 17 saw an increase in net effective rents during the quarter. In the previous quarter, 12 markets recorded an increase in rents. Rental growth is accelerating, with an average quarter-on-quarter increase across the region of 3.1%. In 3Q10, quarterly rental growth averaged 1.8%.

Beijing recorded the largest quarterly rental growth of 9.0% in 4Q10, while rents in Shanghai grew by 7.9%, with the result for both markets being driven by strong spatial demand from MNCs and domestic corporates. Rents in Singapore grew by 8.6% q-o-q, underpinned by a temporary shortage of space. Hong Kong saw a further 4.6% increase on the back of a tight supply situation and solid demand by the financial sector. On an annual basis, Hong Kong led the way across the region, recording a strong 33% increase in rents.

In a few markets where tenant demand remains weak, rents are generally beginning to stabilise or grow moderately. For example, in Kuala Lumpur and Bangkok , rents remained stable in 4Q10 while in Tokyo , rents rose by 2.7% q-o-q as withdrawal of leasing incentives helped offset some residual declines in gross rentals. Rents in Australia and New Zealand saw moderate movements, both positive and negative during the quarter.

Jeremy Sheldon head of markets for Jones Lang LaSalle in Asia Pacific says, "the pick up in demand is broad based, and increasingly includes the local corporate sector, especially in China and India . MNC's seeking global growth opportunities are in the market as well as some new entrants. These trends will continue into 2011 barring any economic or political turbulence. This demand will exacerbate rental increases in markets where vacancy is already low."

Consistent with strong fundamentals, we expect leasing demand to remain solid and vacancies to generally trend down over the next few quarters. Driven by improving occupancy levels, the regional office market is now largely landlord favourable. Rental growth of up to 30% is expected across the region this year, with the strongest growth likely to be seen in supply constrained markets. However, there will be significant variations across markets, with a few laggards that are likely to see little, if any, growth.

Across the region, the average quarterly increase in capital values in 4Q10 was 3.2%, compared with 2.8% in 3Q10. Again Hong Kong outperformed over the year, recording a 36% increase in capital values on the back of strong buying activity, largely by local investors.

Stuart Crow head of Capital Markets for Jones Lang LaSalle in Asia Pacific comments, “Investors are in a confident mood, and capital values have recovered ahead of rents in most markets in anticipation of good growth. We are expecting investment volumes in Asia Pacific to rise by a further 20-25% in 2011 with improvements in the leasing markets helping buoy investor confidence. Companies are poised to start spending again but shortages of quality space will emerge, causing a shift to landlord favourable market conditions in Asia Pacific.”

Almost all major markets saw either stable or increasing capital values. The largest quarter-on- quarter increase was recorded in Singapore and Shanghai , both increasing by 10.0%. Hong Kong, Beijing and Guangzhou followed closely with quarterly increases of about 7.5%. Across the region, the average quarterly increase in capital values in 4Q10 was 3.2%, compared with 2.8% in 3Q10. Again Hong Kong outperformed over the year, recording a 36% increase in capital values on the back of strong buying activity, largely by local investors.

Capital values are expected to increase in nearly all markets during 2011, by up to 25%, as rental performance and investor confidence further improve. Markets expected to see the largest growth include Hong Kong, Tokyo , Singapore and the China Tier I cities.

Return of the REITS? Malaysian market poised for innovation

Cityscape Asia to throw the spotlight on policy settings in regional property markets

Suntec, Singapore. 19-21 May 2009

With Malaysian REITS down but not out in the face of an economic downturn the Malyasian Government has bolstered this popular investment class with a 2009 Budget allowing REITs to open their investor register to up to 70% foreign ownership.

With some M-REITS being 10-45% off their 2007 peaks the move has been welcomed by the sector says Elvin Fernandez, a Malaysian property valuer and Managing Director of the Khong & Jaafar Group of Companies who is a speaker at the upcoming Cityscape Asia conference in Singapore on May 19-21.

“The incentive is ‘right on the button’ as it was awaited by REIT managers and the market for the industry to leap into a period of sustained higher growth and hopefully stake a claim as a regional centre for the REIT industry,” Mr Fernandez said.

While political uncertainty and rising unemployment has impacted market confidence in Malaysia, some key indicators remain sound. Prime office real estate is still generating yields in the region of 7-8%, while the residential market, although currently subdued, is supported by the youthful country’s extremely high rate of new household formation who demand about 80,000 units of houses from the primary market per year, according to Mr Fernandez.

“For Malaysia as a whole, the key relationship between house price increases and income increases has also been tracking in unison over the past 12 years, suggesting a basis for reasonable price support in the market,” Mr Fernandez said.

Malaysian house prices increased at a compounding annual rate of 5.09% over the 12 year period, while household income was up by 5.14% per year over the same period.

“With property (from construction and services) directly contributing some 6.5% of Malaysia’s economy, but impacting as many as 140 other industries and services indirectly, the health of the property sector is a matter of national importance and this explains the Government’s helping hand to the REIT sector,” Mr Fernandez says.

A strong contingent of Malaysian developers is also showing at the Cityscape Asia exhibition to be held at the Suntec Convention Centre. Confirmed exhibitors include Mah Sing Group, EPAD, RS Capital, East Ledang, Danga Bay, Mulpha, NASA TTDI, Camko City, and a number of developers from the Iskandar Development Region which is backing up its successful foray at Cityscape Abu Dhabi with the opportunity to access South East Asian and Chinese investment at the Singapore event. They will also come together during the exclusive Cityscape Asia Investors & Developers Networking Reception to forge international relationships and discuss business and investment issues.

The role of other regional Governments will also be under the spotlight at Cityscape Asia.

The Singapore Government pleasantly surprised the local property sector with a 40% rebate on property taxes in its January 2009 stimulation package, while the Vietnam Parliament is debating changes that could increase sales volumes to overseas based Vietnamese by as much as 1000% per year from September 2009.

In Jakarta, major Government-backed infrastructure projects such as a Monorail, MRT and Airport link are boosting the property sector while stronger regulations for property valuation have improved transparency in debt finance and capital markets over the past few months.

Cityscape Asia
Cityscape Asia - part of the world's largest business-to-business real estate event brand - is an annual exhibition and conference focusing on all aspects of the real estate development cycle. The three day event will run from 19 – 21 May 2009 at the Singapore International Convention and Exhibition Centre (Suntec Singapore).

Top deal-makers from leading developers, banks, institutional investors and investment authorities, as well as senior officers from the foremost private equity funds and investment advisory firms, will gather at Cityscape Asia to discuss the key issues and investment opportunities.

Conference highlights include: surviving the global financial crisis; the future for real estate funds; Asian REITS; markets to invest in for long-term growth and returns; country spotlights in trouble times; the Asian retail decade; and green investments.

Cityscape Asia is an extension of the phenomenally successful Cityscape Dubai exhibition, organised by IIR Middle East, which also include Abu Dhabi, India, Saudi Arabia, Russia, USA and Latin America.

UK-based Scala Land Group is a Gold Sponsor at Cityscape Asia. Scala Land Group presents overseas investors with alternative opportunities to buy land in the UK. CNN is the international broadcast partner.

MAJOR PROPERTY INVESTORS TO GATHER IN SINGAPORE TO DEBATE MARKET DIRECTIONS AND SEEK OUT OPPORTUNITIES

World’s largest B2B real estate investment & development event brand returns to Singapore – cash rich investors now looking for bargain buys

The global property world is turning its attention to Asia with investors hoping 2009 will be the year to begin picking up potentially ‘undervalued’ assets ahead of regional economies emerging from the global financial crisis, say the organisers of the world's biggest international real estate investment event.

"Though not hobbled by the toxic debts that have paralysed many of their western counterparts, Asia's main economies are not immune to the global downturn," said Graham Wood, Group Exhibition Director, Cityscape.

Some economists believe, however, that government stimulus packages and interest rate cuts will turn the tide with signs of recovery possibly emerging as early as Q4 2009.

“A surge in investment sales in Singapore saw over $58 billion in property change hands in 2007 and 2008 and those developers who need to strengthen their balance sheets will welcome the opportunity to present their projects to potential funding partners or outright buyers,” said Mr Wood.

Cityscape Asia has been organised with the assistance of an advisory board, which consists of industry professionals such as; Nathan Lloyd, Executive Vice President and Managing Director, MGM Mirage International; Lawrence D. Sperling, Head of Asia Private Equity, Mercury Partners and Chief Executive Officer, Peak Asia Management; and Nicholas Loup, Managing Director, Grosvenor.

In a joint statement, the board commented, "The past few months have been challenging for all of us working in the real estate industry. But out of the doom and gloom we are optimistic – trying to anticipate where the next opportunities will come from and how we can capitalise on them."

"Established firms, family enterprises and individuals with cash reserves, limited debt and an appetite for risk are expected to be among the first to begin searching the Asian market for bargains in coming months," stated Wood.

"Competition for prime real estate is easing and for investors with money, this could be a once-in-a-lifetime opportunity. Predictions of a rebound in Asian property markets are based on continuing regional urbanisation which has, for example, seen an average eight million Chinese people move to cities annually over the last decade," he added.

Cityscape Asia - part of the world's largest business-to-business real estate event brand - is an annual networking exhibition and conference focusing on all aspects of the real estate development cycle. The three day event will run from 19 – 21 May 2009 at Singapore’s Suntec.
Top deal-makers from leading developers, banks, institutional investors and investment authorities, as well as senior officers from the foremost private equity funds and investment advisory firms, will gather at Cityscape Asia to discuss the key issues and investment opportunities.

Some of the conference highlights include: surviving the global financial crisis; the future for real estate funds; Asian REITS; markets to invest in for long-term growth and returns; country spotlights in trouble times; the Asian retail decade; and green investments.

Cityscape Asia is an extension of the phenomenally successful Cityscape Dubai, organised by IIR Middle East, which also include Abu Dhabi, India, China, Saudi Arabia and South America.Cityscape Asia is sponsored by UK-based Scala Land Group, which presents overseas investors with alternative opportunities to buy land in the UK. For more information about Cityscape Asia 2008 and related events, please visit: www.cityscapeasia.com

Indiabulls Property Trust (IPIT) all set to list in Singapore

Real Estate trusts listed in Singapore have seen unfavorable markets during the past few months, following significant falls in share prices and hence companies opting for Initial Public Offers have rightly stayed away from the declining market. Surprisingly enough, Indiabulls Properties Investment Trust (IPIT) looks like it is set to launch an offering of about S$260 million ($190 million) within the next couple of weeks, following the start of pre-marketing at the end of last week, which means a saving grace for IPOs looking at the Singapore market in the near future.The listing vehicle for this IPO is sponsored Indiabulls Real Estate (IBRE), which is by India’s third largest property developer in terms of market capitalization, will be structured largely as a real estate investment trust (REIT) but will be listed as a business trust to give it greater flexibility with regard to how much of its portfolio can be made up of properties still under development. The initial portfolio will consist of two commercial property developments in the up-and-coming business & commercial district of Lower Parel in Mumbai, which was a former industrial region that used to house numerous textile mills like Pheonix Mills & Jupiter Mills, but is now a micro-market with high-end commercial and residential developments. All Residential as well as Commercial developments in the Lower Parel area, are premium because of lack of availability of good commercial space in Mumbai, high rental values and quality tenants, including banks, financial institutions and large corporations.


Indiabulls Properties Investment Trust (IPIT)’s developments – One Indiabulls Centre (which was formerly known as Jupiter Mills) and Elphinstone Mills are located within two IT parks in the area. When finished, the two combined will have 2.97 million square foot of lettable office space, 438,000 sq ft of retail space and 119,000 sq ft of residential housing. If successfully listed, IPIT will become only the second property trust in Singapore to be backed by Indian assets after Ascendas India Trust (a-iTrust) that listed in July last year, beating DLF and Unitech to the punch. DLF, Unitech and Indiabulls were all considering spinning off part of their property assets through the REIT route or business trust in Singapore around Feb this year, but the plans were postponed as the selling pressure on global equities intensified. At the time, DLF and Unitech were both aiming for significantly larger IPOs at up to $1.5 billion and $700 million, respectively.

It is a logical decision for IndiaBulls Real Estate to vouch for the early mover advantage in being the first to take on the still challenging market. Considering that a-iTrust is still down 30% from its highs from November, this move could prove to be both risky & smart, since the Singapore market is showing signs of recovering.

It is also said that Billionaire Lakshmi Mittal, the world's richest Indian, has committed to buy units equivalent to a 3.9 per cent stake in IPIT, which is in process of listing in Singapore.



Contributed By : Shivang Prabhakar