News »
12. Dezember 2011     Print Print 

Japan dominates Asian real estate funds' allocations

With the sovereign debt crisis at its peak in Europe and the USA and the volatility of capital markets persisting, Asian real estate markets have slightly been forgotten lately. Although the first signs of uncertainty have started to emerge on the Asian continent as well, with listed real estate companies trading at discounts, real estate fundamentals remain largely sound. From the macro-economic perspective, Asian giants, China and India, continue to enjoy GDP growth rates of 9.1% and 7.7% respectively in Q3 2011 while other significant markets such as Singapore and Hong Kong also witnessed GDP growth of 6.1% and 4.3% respectively in Q3 2011. Although economic growth has slightly slowed down in China and India compared to previous years, it remains clear that Asia’s economies have not been substantially affected by on the ongoing economic difficulties in Europe and the USA. Furthermore, the domestic demand in these markets has continuously grown and is significantly higher than it was during the Asian crisis in the 90’s contributing to the relative stability of the present growth.

Regardless of its strong economic indicators, China and India were not the main target markets within the industry in 2011. Asian real estate private equity funds have a new favorite, Japan. With USD 7.4 billion (€5.6bn) and a market share of 37% for the first 9 months in 2011, Japan tops the “shopping list” of fund managers for the first time in years. Compared to 2010 (Target equity: USD 2.7bn), the target equity for Japan has almost tripled with its market share increasing by 13 percentage points y-o-y. The question remains: what are fund managers seeking in a market that has been recording stagnating growth and real estate returns for years and in addition; a destination regularly plagued by natural catastrophes?

Many indicators are currently in favor of the Japanese real estate market. Firstly, after the USA, Japan is still the second largest market in the world in terms of commercial real estate and the largest and most liquid market in Asia. Following the events at Fukushima, the already significant price correction continued but has bottomed out in the meantime.
Quelle: Swiss Lake Capital