Asia-Pac invested stock ‘flourishing’

Asia Pacific will trail Europe to become the second-biggest commercial property market by the end of this year, according to global property consultants DTZ.

But come 2012, DTZ said Asia Pacific’s commercial property market will increase to US$4.4 trillion, placing the region on par with its European counterpart.

Asia Pacific’s commercial property market grew by 14 per cent in 2010 to US$3.5 trillion, registering the biggest growth globally.

This is according to DTZ’s annual “Money into Property” report.

As of 2010, China’s commercial property market grew by 24 per cent on-year to US$1.1 trillion.

DTZ global head of research Hans Vrensen said: “… A two-speed recovery is what we are seeing at the moment.

“Asia Pacific (is) leading the way and the US is trailing behind. And we expect that to continue.

“It’s driven by economic fundamentals. When you look at the impact of debt in the property market, it is obviously much bigger in general Europe than in Asia Pacific, with perhaps, the exception of Japan”.

Funding of commercial property in Asia Pacific continued to grow last year.

The amount of private debt funding commercial property investments grew by 17 per cent to US$257 billion, while private equity funding grew by 13 per cent to US$139 billion.

DTZ said growing interest rates may make private debt less popular.

“On the debt side, some of the government policy will reduce the amount of debt going forward, for the growth of private debt in particular,” Mr Vrensen said.

“Also, some of the debt is being priced higher now and becomes less attractive.

“If you are an equity investor and you want to use debt to enhance the return, if the debt becomes more expensive, you probably are going to use less of it, or you are going to leave it altogether.

“But there’s a lot of development still, in the pipeline.

“You are not going to stop building a building. People will continue to deliver these properties to the market, and that is a big momentum that the Asia Pacific has.”

But DTZ said Asia Pacific is still an attractive investment destination for commercial property.

Demand for prime office space is high in emerging markets such as China and India.

For instance, office rents in India grew by five to 10 per cent last year.

DTZ head of Asia Pacific research David Green-Morgan said: “We are seeing rents improve in both countries but not at such an extent that is causing occupiers problems.

“There isn’t any concern about a bubble being created; it is good sustainable long-term rental growth”.

DTZ said investors are now looking to non-prime office space outside central business districts, compared with prime office space.

It said non-prime office space generates better returns for investors due to lower prices.

Source : Channel NewsAsia – 26 May 2011

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