Tokyo Offers Top Investment Prospects

Source : The Business Times, December 4, 2008

It moves up to first place in survey after being rated third in the past two years

(TOKYO) Tokyo takes the top spot for next year's real estate investment prospects among big Asian cities, with many foreign investors seeking opportunities in Japan's beleaguered property market, a survey showed yesterday.

Tokyo moved up to the first place after being rated third in the past two years, while Shanghai dropped to the fifth from last year's top slot, the survey conducted by US research institute Urban Land Institute and PricewaterhouseCoopers showed.

The survey, based on 180 respondents ranging from global investors, property developers and brokers, was conducted between the middle of August and October.

Ho Chi Minh City was ranked the best market for office properties, followed by Tokyo, Mumbai, Shanghai and Bangalore.

Vietnam's former capital city was also rated on top for retail and apartment residential property, the study showed.

The strongest 'buy' and 'hold' recommendations for Tokyo were in the office property sector, where 46 per cent of respondents placed 'buy' and 43 per cent gave 'hold' ratings, said the survey for hundreds of investors, developers and lenders.

PricewaterhouseCoopers' partner Raymond Kahn said in a statement that foreign investors remain interested in Tokyo even under the current weak property market conditions. While some investors are finding opportunities, however, the number of transactions has fallen significantly and there is still some disconnect between buyers and sellers, Mr Kahn wrote.

As for Tokyo's residential property sector, 28 per cent of respondents placed 'sell' with 39 per cent rating 'hold', the survey showed. Offices took top ranking for both investment and development, among property sectors most promising in the Asia-Pacific region, the survey showed.

A Reuters poll of Asia property market last month showed that Tokyo's top-notch grade A office rents and capital values are seen slipping by up to 5 per cent by the end of 2009, but better placed to weather the regional downturn expected to be led by Hong Kong and Singapore. -- Reuters

Egypt, Brazil Among Top Picks Of Property Tycoon Sam Zell

Source : The Business Times, December 4, 2008

(NEW YORK) Brazil, Egypt, Mexico and China remain some of the best places for property investments as the global financial crisis drags on, real estate mogul Sam Zell said on Tuesday.

Those countries have a shortage of affordable housing and infrastructures that support foreign investment, Mr Zell, chairman of Equity Group Investments LLC, said at a forum in New York sponsored by the University of Pennsylvania's Wharton business school.

Brazil is self-sufficient, has a strong pool of skilled professionals and otherwise unlimited resources, he said. The country also offers scale, he said, citing same-store growth for Equity Group Investments- owned malls of 12 per cent over the past year.

In April, Mr Zell said Brazil's biggest mall operator was seeing retail sales growth of 10 per cent annually.

'If you look at all of the facts, I don't think there is a better environment in all the world than Brazil,' said Mr Zell, who has suggested the country could surpass China in economic might in 30 years.

Similar conditions hold true in Egypt where 'there is an enormous shortage of housing', he said.

In Brazil and Mexico, funding for housing has been unaffected by the turmoil in capital markets that has frozen or dampened housing elsewhere, he said.

Mr Zell said he is also investing in low-cost housing in China, where results have been 'so far so good'. Much of the financial crisis that has taken a toll on confidence stems from demand in the United States and Europe that 'wasn't real', supported by leverage, he said. True demand, such as that seen in Egypt, will have to re-emerge to lead any recovery elsewhere, he said.

'Where is (the market) going to recover? It starts with demand,' he said. 'Where demand overcomes the environment.'

Countries to avoid include Japan, which has a shrinking population, and India, where licensing and 'bureaucracy beyond belief' discourages foreign investment, he said.

He also stays away from Russia where tax authorities could literally steal companies from their owners, and from Turkey, where he fears the authorities could use the press against foreign investors.

In the US, the biggest issue is a lack of confidence that has spread beyond the sub-prime mortgages that triggered the crisis, he said.

A drumbeat of negative news from companies, such as General Electric Co's announcement on Tuesday that fourth-quarter profit would be at the low end of forecasts, adds to the deficit in confidence, he said.

'When you don't have confidence, nothing good happens,' he said. -- Reuters

Manhattan Awash In Open Office Space

Source : The Business Times, December 4, 2008

Finance firms giving up space as they downsize, picture could get worse

(NEW YORK) Last year, when the New York real estate market was still frothy, large blocks of office space were hard to come by. Not anymore.

More space soon: The concrete core of the Freedom Tower being built, on the site of the World Trade Center. The new building, higher than the Empire State Building, will add to the glut of Manhattan open office space available

Almost 16 million square feet is currently listed as available in large blocks in 68 office buildings in Manhattan, according to Colliers ABR, a commercial brokerage firm. That is nearly double the space available a year ago, both in terms of the number of large office blocks - which in New York usually means 100,000 sq ft or more - and in terms of total square feet.

Those figures are widely expected to go much higher, said Robert L Sammons, the managing director of research for Colliers ABR. He said it was difficult to get a handle on exactly how much space financial companies alone might put back onto the Manhattan office market over the next year or so.

'Honestly, I don't think any of these financial firms knows how this is going to play out,' he said. 'They are trying to figure out how many people they will need on staff, and in some cases how they are going to stay in business.'

Pending layoffs in the financial industry certainly account for some of the space on the market. But there are other factors. Some companies are moving into new headquarters - which were first planned years ago - while others are disposing of real estate that they came into through acquisitions.

By far the biggest increase in availability has been in the sublease market. Currently, at least 16 large office blocks are being marketed for sublease in Manhattan, up from just three listed at this time last year, according to Colliers ABR.

Michael Colacino, the president of Studley, a real estate brokerage firm that specialises in representing office tenants, said the sublet space that had come onto the market recently was attractively priced.

He said some tenants might do better by shopping the sublet market rather than trying to renegotiate a better rent with their current landlords. 'A lot of landlords are still in denial,' Mr Colacino said, 'but the sublease space is priced realistically for the actual market conditions.'

Mr Colacino estimates that the actual rents on deals signed in the last three months are down by as much as 20-30 per cent from the going rents at the end of the summer - to around US$75-80 per sq ft annually in midtown and around US$45 per sq ft downtown.

Among current offerings - including both subleases and direct leases from owners - roughly a quarter of the space in the midtown and downtown office markets became available because a financial company either did not renew its lease or decided to market the space for sublet.

But the picture could become much starker next year. Among large office blocks that brokers expect to hit the market, Mr Sammons estimates that the financial industry will account for roughly one-third of the new space coming on the market in midtown and more than half of the new space downtown.

Lehman Brothers, Merrill Lynch and Deutsche Bank all have leases that Mr Sammons counted among the potential new listings of large office blocks. And that list does not include Citigroup - although the banking giant has announced that it will lay off more than 50,000 employees worldwide - because Mr Sammons said it was too soon to know if Citigroup would give up any large office blocks in Manhattan.

So far this year, brokers say, the main event in midtown has been the completion of One Bryant Park, a 54-storey office tower that recently opened at the corner of 42nd Street and the Avenue of the Americas.

As the main tenant Bank of America moves employees into this new building, it is giving up earlier leases for hundreds of thousands of square feet in other prominent midtown office buildings. -- NYT

Developers In China Scramble To Raise Cash

Source : The Business Times, December 4, 2008

(BEIJING) Suffering from a slumping housing market, Chinese developers are scrambling to find new ways to keep the cash flowing in and creditors at bay, with anything from factories to timeshares in their sights.

An oversupply of new apartments in an economic downturn, and the lingering effects of government steps to stamp out rampant property speculation have sent home sales and prices tumbling.

Capital markets are closed, and loans have dried up.

'Banks give you an umbrella when it's sunny and want it back when it's raining,' said Li Xiaodong, chairman of J&J Assets Management, whose US$300 million fund invests with property firms.

'So you have to choose products that are more suitable for the market at the moment,' he advised developers at a conference in Beijing. 'There's money out there, but there's no confidence.'

In a five-year boom, China's developers grew quickly and notched up huge profit margins, often of as much as 50 per cent, as they built on land accumulated cheaply and sold apartments in a fast rising market.

But many who bought land at a 2007 price peak are suffering now, with sales down by as much as half from last year. The country's biggest developer, China Vanke, has slashed prices by a third, and others have gone further. And now they are looking away from housing. Beijing-based Antaeus Group is selling rooms at Hainan island resorts, giving buyers stays of 30 days each year and a share of room rates.

'A lot of movie stars and real estate developers are buying,' said the firm's chairman, Zhang Baoquan. 'We need to survive the winter,' he said of the market downturn. 'But once spring comes, demand will be released.'

Shanghai-listed developer Vantone Estate aims to spend three billion yuan (S$667.2 million) on industrial property in the next couple of years, according to Wu Dongwei, general manager at the unit responsible for the venture.

His first deal, which is still being negotiated, is for a factory in Wuxi that will be bought and leased back to a television maker faced with slowing exports.

'We're trying to diversify,' Mr Wu told Reuters. 'There are a lot of companies that bought a lot of land very cheaply, or for zero because local governments gave it to them,' he added. 'But now is a very bad time, so they're trying to get more cash in and divesting assets.'

Holding investment properties usually produces much lower returns on assets than building homes because equity is tied up for much longer.

But Hong Kong developers have used the tactic well to smooth earnings, in a volatile property market. Office and retail rents are typically renegotiated every three years, while industrial and warehouse property leases can last a decade. -- Reuters

No New Site For Land Sales

Source : The Straits Times, Dec 4, 2008

THE Government is not adding any new sites to its land sales programme for the first half of next year, given the continuing weak global economic outlook.

The Government is not adding any new sites to its land sales programme for the first half of next year, given the continuing weak global economic outlook. -- ST FILE PHOTO

It is also offering less commercial space. And there will not be any new supply of private home units from Government agencies, outside of the land sales programme.

'The global economic outlook is likely to remain weak in 2009 and this would have an impact on Singapore's economy, including the property market,' said the Ministry of National Development in a statement on Thursday.

This means that there will only be 'reserve list' sites available for sale in the first half of 2009. Such sites will only be put up for tender if a developer indicates interest in it by submitting a minimum bid that the Government finds acceptable.

A total of 38 sites are available on the reserve list, of which 37 are carried over from the reserve list for the second half of this year, and one is the unsold executive condominium site in Punggol. The unsold EC site was from the confirmed list, which meant that it was for outright sale but there was no demand.

At the start of last month, the Government already announced that it will be suspending outright land sales in the first half of next year. It was to stave off the risk of oversupply given the weak property market outlook.

Developers, who prefer the reserve list system as it allows them to adjust supply to meet demand, had cheered the move.