Commercial real estate will be of most interest to investors in Asia in 2010 despite a rebound in the continent’s residential market, according to Aberdeen Property Investors.
Glynn Nelson, head of research and investment strategy for Asia Pacific at Aberdeen's real estate investment management arm, told PERE the rebound in residential real estate markets had resulted in some “overheating”, a trend that would prompt investors to eye commercial property investments more seriously.
“As loose monetary policy is progressively tightened and concerns that residential markets are overheating, commercial real estate markets will likely be the area of most investor interest this year,” he said. “Prime cap rates have stabilised and we see room for rates in gateway cities to firm this year.”
Aberdeen currently manages £22.6 billion of real estate, however only £500 million is in Asia. The organisation, which has approximately £146.2 billion ($233.9 billion; €160 billion) in assets under management, has greater exposure to Asia through its equities and fixed income assets.
Nelson’s prediction comes as the group this week highlighted, in a report, increased domestic consumer demand and a move away from export-dependency in Asia as key trends that would drive economic growth in the region.
Hugh Young, managing director of Aberdeen Asset Management Asia, said: “We believe that Asian economies will continue to make good progress in 2010, as domestic demand rather than a reliance on exports.”
The firm highlighted China, Taiwan and Korea as examples of economies where the reliance on their exports continues to fall as they become increasingly able to manufacture their own capital goods.
It added while the banking world in the West had suffered of late, Asia’s banking sector had remained relatively robust, enabling the continued availability of bank credit and subsequently consumer spending.
But Young warned the recent corporate earnings growth experienced in the region in 2009 would be hard to recreate this year. He added Asian economies also faced the same risks as Western economies of “fiscal indebtedness”, which could add
pressure on governments “to withdraw stimulus support, increasing the risk of an economic relapse”.