Global property markets teeter to recovery
(Reuters) - Commercial property is in the midst of a multi-speed global rebound in 2011, as the sector emerges from the shadow of recession and is buffeted by a range of economic, refinancing and demand pressures across markets.
Global property investors have piled back into the sector in 2011, plunging cash into the emerging markets of Asia, stoking worries of overheating, and have chased core assets in key U.S. and European cities, causing demand to outstrip supply.
Either side of the Atlantic, uncertainty over capital adequacy-minded banks' plans to sell troubled property assets -- such as RBS' (RBS.L) 1.6 billion pounds ($2.6 billion) project Isobel -- continue to cast a pall over recovery prospects.
At the Thomson Reuters Global Real Estate and Infrastructure Summit industry leaders will discuss the chief stumbling blocks facing the commercial property sectors of Europe, United States and Asia, and how it affects their investment decisions.
Property investors are uneasy about the global funding gap, which consultancy DTZ said totaled about $202 billion, while a slew of insurers, pension funds and private equity houses have entered the debt market, replacing the hitherto dominant banks.
Prime office and retail assets in the UK, France, Germany remain targets for investors chasing income returns, a theme borne out by several developers restarting stalled projects to capitalize on expected economic growth.
In London, blue-chip property companies Land Securities (LAND.L) and British Land (BLND.L) are among those exploiting a supply shortage and rising rents by developing more prime, centrally located London offices.
Elsewhere, property investors are focusing on Spain as it nears the nadir of its economic cycle, while other developers head to emerging Europe, betting economic growth will offer heady returns.
ASIA SPEEDS AHEAD
Asia's emerging markets, particularly China, are tipped to lead the global rebound in commercial real estate, as their rosy economic outlook and rising property values attract yield-hungry investors in burgeoning numbers.
Capital values in Asia's office sector are growing at 20 percent a year, against annual growth of 9 percent in the U.S. and 3 percent in Europe, Kevin Stanley, executive director for CB Richard Ellis' global research and consulting, said.
"It's a value indication where the various markets are doing in the recovery. Clearly Asia is surging ahead and that's why interest is focusing there," he told Reuters.
The debate is now turning to whether Asia's property markets are overheating. On Wednesday, Standard & Poor cut its outlook on China's property market to negative from stable, citing potential regulatory tightening that may cause property prices to tumble.
In the United States, investors are increasingly optimistic that the nation's recession-stricken commercial property sector is finally on the mend after a number of marquee properties in New York and Washington recently sold at high valuations.
Some analysts, however, have warned it may be too early to celebrate a recovery, as property values are still depressed in most markets and are unlikely to pick up until the broader economy significantly improves.
Like Europe, the U.S. also faces the problem of raising capital in time to meet the maturity dates for the $952 billion in commercial property loans the sector holds, which could see more banks defaulting if they are unable to refinance in time.
(Additional reporting by Ilaina Jonas in New York; Editing by Andrew Macdonald)
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