Tag Archives: Commercial Property

Industrial, commercial property prices rise in Q4

Experts have said that commercial and industrial property will continue to outperform the office market this year.

This comes after Urban Redevelopment Authority (URA) figures showed higher quarterly prices for industrial (4 per cent quarter-on-quarter) and commercial assets (13.8 per cent quarter-on-quarter). Meanwhile, city rentals have slowed.

The trend of cooling office rents is clear. While URA’s rental index rose 8 per cent last quarter from a year earlier, it was the slowest rise in 2011, up by just 0.6 points from the previous quarter.

Chris Koh, a property analyst, said: “Many have kept their space, renewed their leases. If they did take up more space, they were a bit more conservative in taking up the space. So we did not see rental prices increasing at such a large volume.”

A brutal combination of economic uncertainty and an oversupply of office space has set the tone for 2012.

Colin Tan, research consultancy head at Chesterton Suntec International, said: “Grade A depends on banks and financial institutions. And the outlook for this industry has been, in a sense, depressed looking forward. So the demand from tenant group has shrunk. So I expect office numbers to weaken, led by Grade A.”

And in the persistent low interest rate environment, property analysts note that foreign investors have been pushed to look at buying commercial and industrial properties instead, especially after the recent Additional Buyer’s Stamp Duty on residential property.

Angela Lee, managing director of Lianco International Property, said: “Industrials like marine and chemical industry are expanding this year. Therefore, we expect pricing at 5 per cent up, minimum for the warehouse property sector.”

With output from the marine and offshore sector expanding by 19 per cent last year, experts expect strong demand for industrial space, while upcoming shopping malls should be easily absorbed.

Retail property is expected to face the least headwinds. Despite some fears of an oversupply in the coming years, some analysts said population growth has in fact reduced retail space per capita.

Source : Channel NewsAsia – 27 Jan 2012

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

Commercial property looking attractive for the world’s wealthy

Commercial real estate is one of the top two assets, along with equities, that wealthy individuals and their investment advisers are targeting for investment this year, according to a study published by property consultancy firm Knight Frank and Citi Private Bank.

The study showed that wealthy investors plan to allocate around one-fifth of their investment portfolios to commercial real estate and another 19 percent to equities this year.

The study surveyed around 40 investors and 70 investment advisers globally, with each of the investors possessing investible assets (excluding primary residences) valued at more than US$10 million.

Most investment advisers said they would suggest that one-fifth of investment portfolios be allocated to commercial property, with 11 and five percent going to commercial and residential properties respectively.

“Commercial property is a more established investment asset class compared to residential. There is more data available on asset performance, and therefore advisers in particular tend to prefer it,” said Liam Bailey, Head of Residential Research at Knight Frank.

“Property is a huge and important asset class. Most wealth advisers and their wealthy clients would look to have some exposure to this asset.”

Alvin Yip Kwok-ping, Co-head of Investment for DTZ China, said that Hong Kong and mainland China would also see investors choose commercial and residential properties this year.

“In Hong Kong, some buyers have been discouraged from investing in residential properties since the implementation of the special stamp duty last year,” said Mr. Yip.

“So relatively, they would be more interested in commercial property, although both of them are hitting their historic high prices now.”

The study also showed that Monaco remained the most expensive residential location globally, with average prices of luxury properties hitting US$65,600 psm. This was followed by London, where luxury properties are priced at US$56,300 psm.

With an average price of US$27,300 psf, Hong Kong is home to the second most expensive residential properties in Asia and ninth globally, behind Tokyo. In 2010, Hong Kong was the fourth most expensive city in the world.

Source : PropertyGuru – 13 Apr 2011

$362b for global commercial property

About US$280 billion ($362 billion) of capital will be available to invest in global commercial real estate next year, with the United States market drawing the most buying interest as it bottoms out, according to property consultant DTZ

DTZ said the estimated available capital for 2011 would be 22 per cent up on a forecast it made in December, with US$97.4 billion (up 54 per cent) for the US; US$111.8 billion (flat) for Europe, the Middle East and Africa; and US$71.4 billion (up 29 per cent) for the Asia-Pacific region.

“The current attractiveness of the US is in stark contrast to the situation a year ago. Most US markets were cold, offering expected returns below risk-adjusted required returns,” said Mr Nigel Almond, DTZ’s associate director of forecasting and strategy.

“This opportunity remains largely unexploited to date, since transaction volumes in the US have not yet seen the levels witnessed in Europe and Asia Pacific,” he said.

The shift in interest follows an earlier report by DTZ, which found prime commercial property in the US and Asia-Pacific was more attractively priced on a five-year horizon than in Europe.

Listed property companies, many having raised capital to repair their balance sheets during the global financial crisis, are back on the market, equating to 17 per cent of investors, up from 4 per cent in the end-2009 estimate, DTZ said.

The amount of capital targeting assets in a single country is also significantly higher, again due to heightened interest in the US, where some analysts predict the hard-hit office market has hit a bottom.

The proportion of capital eyeing single countries next year rose to 44 per cent, from 30 per cent at end-2009, with about half of those funds looking at the US alone, DTZ said.

Source : Today – 15 Oct 2010