Saturday, November 17, 2007

Investors eye Indian real estate

THE Australian superannuation industry's continuing strong growth will drive increased investment in offshore real estate, according to forecasts from CB Richard Ellis.

Its executive director of research for the Pacific region, Kevin Stanley, said the $1 trillion superannuation sector was tipped to almost double in size over eight to 10 years - growth that would compel investors to look at global investment opportunities.

Speaking at the firm's annual World Series Real Estate seminar in Sydney this week, Mr Stanley said while Australian investors had been directing the majority of their offshore capital into the US, regions such as Asia were expected to attract increased investment.

Japan has attracted a significant amount of Australian money. Galileo Japan Trust is the latest to update its leasing activity, saying it has five new leases with an average increase in passing rent of 38.1 per cent.

The trust's managing director, Peter Murphy, said Tokyo office vacancies continued to fall and rent growth was strong.

"Real estate fundamentals in Japan continue to trend positively, particularly in the greater Tokyo area, providing strong prospects of further rent increases in the short to medium," Mr Murphy said.

CBRE's Japan director, Andy Hurfurt, said that while further investment was anticipated, Australian investors were unlikely to be quite as acquisitive in the year ahead as a result of issues associated with the subprime crisis.

"Lenders have become a lot more cautious. Whereas four to five months ago, you could secure 90 per cent financing, now you're struggling to secure 70 per cent," Mr Hurfurt said.

However, this had failed to impact on pricing levels, with core - rather than opportunistic - money driving the investment market.

"One area of opportunity for investors would be the B-grade office market, given that much of the new development in Japan had focused on premier office space. This had created pent-up demand from medium-sized business looking for high-quality buildings which offered smaller floor plates.

"Senior housing and nursing homes would be another area of opportunity, as a result of changes to the traditional family structure in Japan," Mr Hurfurt said

The chairman and managing director of CBRE South Asia, Anshuman Magazine, and the president and chief executive of CBRE Greater China, Chris Brooke, said although South Asia, China and South Korea had attracted limited Australian investment, increased activity was expected as a result of strong economic growth in those regions.

Mr Brooke said the Chinese Government was focused on attracting long-term foreign investors - rather than speculative money - into the market. While new government policies had made it more challenging for first-time entrants, there were opportunities to form joint ventures and strategic relationships with domestic companies.

China's emerging logistics sector was another area of opportunity that was attracting offshore investment from the likes of Goodman and ProLogis.

India is another market attracting significant offshore attention, with an estimated $US10 billion ($11 billion) committed to real estate development in the year ahead, mostly by private US hedge funds, Mr Magazine said.

"India's robust economy, which had been growing at an unprecedented 9 per cent per annum for the past four years, had been a magnet for investors since India opened its doors to foreign investment in real estate in early 2005," he said.


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