DTZ: Emerging markets RE a hedge against Western decline

John Slade, head of international investments for the global real estate advisory firm, believes emerging markets ‘are not going to be halted in their tracks’ by a slowdown in the US.

Emerging markets can hold their own against a US recession, according to John Slade, head of international investments for real estate advisory firm DTZ.

Slade, in a recent interview with PERE in New York, said: “Emerging markets are not going to save anyone, but they are not going to be halted in their tracks by what’s going on in the US.”

Slade cited China and India’s population growth and Russia’s natural resources as buttresses against economic slowdowns triggered by weakness in the US economy.

He noted that with the tightening credit crunch across much of the West, real estate investors are eagerly seeking out new opportunities in emerging markets such as China, India, Russia and Brazil. Paul Wolfenden, DTZ's head of global valuations, warned though: “I don’t think any market is immune [from a global downturn].”

In the meantime, the industry in the US and Europe is coming to terms with the reality that prices will not return to the dizzying heights of 12 to 18 months ago, Wolfenden and Slade said.

“We are in a new world, there has been a complete pricing adjustment,” Slade added.

The price correction has been much more deep-rooted than anyone had first feared, and some investors will be stung by the revaluation of real estate, said Slade adding: “There’s going to be some dead bodies on the street.”

Wolfenden and Slade, both based in London, predicted a pickup in transaction volumes during the second half of this year. Wolfenden said there was plenty of equity capital to “drive the market” and that most real estate funds are currently “cash-rich” and adopting a wait-and-see attitude as to what will happen next. “[They] are sitting on their hands at the moment,” said Wolfenden.