Friday Letter Asia is the place to be

Predictions continue to be gloomy for real estate deal volume in Europe and North America in 2008. But Asia seems to have not received the slowdown memo. 

The 2007 numbers are still rolling in, but the overarching storyline seems to be established – in both Europe and North America, 2007 was a bipolar year. But in Asia, the real story was the phenomenal growth of real estate deal volume. This sets the stage for a 2008 in which the center of gravity is clearly in Asia.

In the West, the first half of the year saw record transaction volumes, while the second half saw significant declines. According to new global capital flow research from Jones Lang LaSalle, by mid-year a record $171 billion in real estate deals had been completed in the Americas, mostly fueled by the wave of REIT privatizations. However in the second half, transaction volumes softened to $141 billion. In Europe, the first six months saw $168.5 billion in transactions. Yet in the second half, $158 billion changed hands, a 14 percent decline from the same period in 2006. Analysts continue to predict a similar slowdown in 2008.

Yet in Asia, this first half/second half dichotomy was muted. Volumes for the whole year reached $121 billion, an increase of 27 percent from 2006. Fundraising for Asia continues to increase as well. According to a new report from Probitas Partners, the number and size of funds exclusively targeting Asia has grown exponentially over the past few years. In 2007, more than $10 billion was raised for Asia-dedicated funds, a nearly 30 percent increase from the amount raised in 2006, and about 10 times greater than the amount raised in 2003.

The investment dollars seem to be following the hype surrounding Asia’s promised growth. The emerging markets of Asia continue to see economic growth outpacing other regions, which has translated into a strong and increasing appetite for Asian real estate. More and more private equity firms are setting up Asian offices, and LPs continue to increase their allocations to the continent, particularly to China and India. Despite all this, uncertainties still remain as to how a US recession might affect the Asian economies.

Many of these issues will be discussed at the end of this month at the 2008 Asia PERE Forum in Hong Kong. Co-sponsored by PERE magazine and the Asian Real Estate Association (AREA), the forum will be the first of its kind looking specifically at the future of private equity real estate in Asia. With speakers including ING's Robert Lie, Macquarie's James Quille and Trikona’s Aashish Kalra, the gathering should present a divergent set of opinions on what all these trends in Asia actually mean. As private equity interest in real estate shifts from troubled markets in Europe and North America toward more of a focus on Asia, it will become increasingly important to have detailed, on-the-ground knowledge of the forces and key players shaping those markets


Some of these key players in Asia, such as Carlyle’s Jason Lee and Morgan Stanley’s Zain Fancy, have shown up in the final nominations for the Global PERE Awards, which have just gone live today. Now that all the votes have been cast in the first round, we can reveal the shortlisted parties in each category. Click here to see the nominees and vote for your favorite.