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Tuesday, April 15, 2008

Commercial assets still the rage

Office buildings continue to be the darling among global investors, but the scene could be changing

Last year might have marked the time when global investors first began feeling bearish about future prospects. But still, their appetite for commercial real estate remained healthy.

According to the Global Capital Trends survey conducted by United Statesbased research firm Real Capital Analytics (RCA), over US$1 trillion (RM3.2 trillion) worth of commercial properties in 75 countries were traded in 2007.

Of these, an astounding 32,000 assets went for at least US$10 million (RM32 million) a piece!

RCA also found that office buildings accounted for 42 per cent or US$434 billion (RM1.39 trillion) of total sales, while retail complexes came second, with 17 per cent or US$173 billion (RM554 billion).

The firm’s description of “commercial real estate” includes industrial parks, hotels, commercial development sites and apartment projects.

Despite “2007 (being) a year when the long bull market came to an end” as a result of the ongoing credit crunch in developed markets, it said investors were still making record cross-border investments in property.

The trend was particularly noticeable in Asia where “strong urban growth continues to overcome the disruption in the world’s credit markets”, said RCA, pointing out that four Asian countries are among the world’s top 12 nations that lured 90 per cent of total global property sales.

Leading the Asian pack was China, which accounted for US$59.6 billion (RM190.7 billion) or 40 per cent of all acquisitions made in the region. Of the amount, 84 per cent involved land for commercial development.

Other top Asian countries were Japan with US$38.1 billion (RM121.9 billion); Singapore US$18.6 billion (RM59.5 billion); and Hong Kong US$14.4 billion (RM46.1 billion).

Malaysia, which sold about US$2 billion (RM6.4 billion) worth of commercial stock, was ranked eighth on the Asian list.

RCA also found that office buildings in Singapore were sold at an average of US$1,000 (RM3,200) per square foot, putting them slightly ahead of those in the United Kingdom, which averaged US$979 (RM3,133) per square foot. However, it said London’s buildings were the world’s priciest at US$1,257 (RM4,023) per square foot.

In terms of yields, the research firm found that the office buildings in the 12 nations that enjoyed the most trades averaged six per cent, but in Asia, it was below five per cent.

Sale and leaseback deals also increased last year to US$56 billion (RM179.2 billion), and made up about 10 per cent of the trades done in Europe, Asia and Africa. To encourage greater

volumes of cross-border investments in the future, RCA advised that countries wanting to continue attracting commercial property investors to their shores should strive for higher levels of transparency.

By New Straits Times (by P Rajan)

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