Many investors say that trends are reversed

After an attempt to Singapore in 1997, carried out at the beginning of the financial crisis that has shaken Asian markets for two years, the Mipim Asia 2006 Vintage has proved very convincing. Its organisers, Reed Midem, saw much greater this year in Hong Kong where, from 27 to 29 September, they proposed a fair of the real estate business to the extent of developments in Asian markets. The centre of the Congress of the totally Chinese metropolis since almost ten years has attracted more than 2,000 participants from 49 countries, 70 of Asia, the balance of Europe, North America and the Middle East.

To attract investors, 257 international exhibitors competed imagination in prestigious stalls. The 21 French companies who made the trip say established encouraging contacts. "It is an opening on the world," confirms Manuelle Gautrand, architect. A dozen conferences have presented the qualities of different Asian markets and given keys to implementation in the larger eastern cities.

The abundance of international capital changes the geography of the investment of real estate companies. Number of investors who scour the world in search of good projects in stable countries seek today to discover and to enter the Asian markets the most broad and the more open and regulated. American funds from California, Florida or New York, and European, especially British and German, are seeking higher returns than they are in their country. Institutional investors share the same concern and Prudential Insurance or ING strengthen their presence in the far East.

Needed to both invest in the Asia-Pacific region Professionals recognize that its markets are more volatile, less transparent, and that they have not yet taken into account all the criteria in force in the West. But how can they ignore that it is in this region of the world real estate experienced its greatest development Eblouis by the number, size and diversity of the current buildings, American investors in mind, take the turn, arbitrate their heritages and transferring capital to position itself in the most secure Eastern markets, often at prices both very good products is narrow in the most desirable cities. A point that some now plan to promote programs instead of buying existing works. Certainly more risky, approach them is potentially more profitable.

The area represents a large share of the global real estate market with 43 billion placed during the first half of 2006, against 31 billion during the same period of 2005, is an increase of 40, according to Jones Lang LaSalle figures. Leung Chun-ying, Chairman of DTZ Asia, announces a new record of 448 billion dollars invested in real estate business in the world in 2006, on which transactions in East Asia will have increased by 60, compared with growth of 20 in the US and 3 in Europe.

"This area has grown strong and fast for three years, assessed at 5 in 2005, thanks to China that displays a score of 9.9," observes an expert, adding that the fundamentals are robust and support real estate expansion. "Transactions and office rents are rising, malls thrive all, manufacturing premises application is substantial and the residential became an investment product with however risk of surplus products in certain cities." Hong Kong, Singapore, Sydney, Tokyo see their values fly.

Many investors say that trends are reversed. "There is still little time, the funds invested 75 of their capital in Europe and 25 in Asia. "Today is entirely dedicated to the East, with in their sights the Japan, Korea, Singapore and... China where investors remain cautious", says Louis - Michel Merino, President of Euro Hypo to the Japan. Asia has retained this year 920 million over the $ 1.3 billion by the Global Fund II of Macquarie Global Property Advisors Fund.

"We expected to see Western markets of real estate business suffer in two or three years and in particular the Anglo-Saxon markets, Australia and New Zealand included, continued the specialist." This explains the current behavior of investors clearly operating a reallocation of assets to Asia and also the Russia. "The German funds, subject to the intense competition of all investors, are now too difficult to invest at home, in London and Paris have become too expensive, are turning to these markets where everywhere, except in China, Office vacancy rates decreased and rents increased.

"Investors see an increase in rents throughout the Asia Pacific, with the exception of Beijing area, it is very important to Tokyo, Seoul, Singapore and especially to Hong Kong where the leasehold of the best buildings values have quadrupled since 2003, from 240 euros per square metre and per year to more than 1,000 euros in September 2006", confirms Richard MiddletonDirector of the Office of Cushman & Wakefield in China. Jones Lang LaSalle said that rents in the financial district of Hong Kong increased by 44.3 between March 2005 and March 2006, and announced a new increase of 20 this year in this city and at Singapore. Pragmatic, an important German Fund said already ready to liquidate its portfolio European, London included, to invest these Oriental, especially in the Japan even if the fact of a square metres offer limited markets and, therefore, a strong increase in values, he met difficulties to acquire.

Absent five years ago, the REIT have made an entry on the markets of Hong Kong, Singapore and the Japan by placing more than 52 billion dollars. Alongside of committed funds to the Japan 50, twenty were formed in less two years. These financial vehicles would hold EUR 117 billion in real estate throughout the Asia-Pacific region on global amounts to 350 billion

EUR. Investors who were in their first approaches to the return on investment of 30 see their expectations brought about 20.

The most beautiful target

Naturally disparate, most Asian markets are booming again. After the financial crisis of 1997, the city of Hong Kong has actually reconnected with expansion two years ago. While no barrier stop foreign investment, real estate activity continued to be dominated by local players but this situation changed quickly. "Rapid increases in rents which are expected to continue for two years, until the arrival on the market of new buildings, encourage international investors to come back." "This, as far as the transparency of operations and the absence of capital gains taxes make the city one of the most liquid markets in the world", prognostic Richard Middleton.

Since 2003, point the bottom of the cycle, the number of transactions grew and the interests of the cross-border buyers for the range of real products is amplified. Demand for businesses is, in particular in the banking sector and especially companies from China. For host, the giant office towers grow at full speed, drawn by renowned architects, built by major groups to promote Hong Kong Swire, Sun Hung Kai, Cheung Kong, Wharf, also active in the construction of thousands of housing units. Today offices of this Chinese metropolis Park displays a 5 vacancy rate, when it stood at 45 per cent in 1998. Thus the rate of return fell under the threshold of 5 and even 3.5 for the "prime" surfaces and shops. The regional government control yet almost all of the land, however the future of construction after 2047 leases will depend on land policy of China, instilling uncertainty.

More dynamic, after ten years of recession, Japanese Office real estate market took over first place in the Asia Pacific region, keeping 51 of the volume of the transactions were recorded in the first half of 2006. With 116 million square metres dedicated to businesses, Tokyo Park is still the largest in the world, representing surfaces cumulative Ile-de-France, greater London and Manhattan. The capital of the archipelago sees the values of its offices would "prime" reset to heights over the past two years they jump still 15 this year according to CB Richard Ellis and the competition for investors to get their hands on new buildings to exacerbate. Passed below the million square meters of previous two years, finished surfaces in 2005 totalled 800,000 m2, according to data from Mori Trust, but deliveries expected to double this year. All new offices are préloués and real parks restructured to meet the demand pressure.

In this context, the venal and rental values increase and the rate of return were between 6.5 and 7 four years ago fell to 3 in the business districts of the city where the vacancy rate is close to zero. The major industrial groups such as Nissan and Toyota reinvest parks and centres of research while that companies are moving away from obsolete offices for the benefit of Cree last sets where rents can reach 1,200 euros per metre squared per year in the most beautiful buildings, average at 800 euros/m2/year.

China features

What good business and for how long in Beijing, Shanghai and all of these secondary so-called cities that host more than 3 million people Engaged for twenty-five years, China's growth stunned observers but does not throw doubts of Western real estate investors face a closed, opaque, complex and highly regulated market. A market Several markets booming submitted to the change of laws and the addition of restrictions to the address of the foreigners. Thus, to discourage sophisticated use of the loan arrangements which enabled the launch of huge programs offices and housing, they now fund half of the value of their investments of more than 10 million in capital.

"The legal framework is difficult but surrounded by great care, we can still work in China," reassures the regional President of Euro Hypo associated to Commerzbank to finance the acquisition of a shopping centre already delivered to Beijing for an amount of EUR 100 million. "The demand is huge, urbanization feeds, institutions to reform, the banking system is cleaner and to lessen Government, developers become more realistic." "The market is corrected," said Professor Fan Gang of the China Reform Foundation, for that overexcited property policy can be adjusted and controlled corruption but the social problem is around 200 million job seekers today in a country that creates 10 million per year.

Further to the West, another heavy weight emerge, the India is a market of "Developer" closed to investors who are not allowed to acquire existing Office programs but can buy sets residential, shopping centres, hotels and even some economic zones industrial parks. Infrastructure spending will reach $ 189 billion in the next five years while the statistics of the Government amount to 20 million housing deficit. Currently drawn by the sectors of technology and services that represent 70 of the annual demand for space in the major urban centres, the economic growth spurred demand for real estate business. Sanjay Verma, Associate Director of Cushman & Wakefield in India, evaluates the annual transactions in the country to 2.4 million meters square, equivalent to a capitalization of $ 1.4 billion, and calls his greeting of the Western funds that would strengthen the supply of square metres. "A new law may 2007 allow the emergence of REIT in India up the market", announced Kevin Swaddle, Director of IPD for Asia.

Thus, the beginnings of a real estate story emerge in all Asian countries.