Asia recovery predicted in 2010 by investors

Investors have put short term allocations to Asian non-listed real estate funds on hold but remain committed for the longer term, according to the lat

by News Desk

Investors have put short term allocations to Asian non-listed real estate funds on hold but remain committed for the longer term, according to the latest research by AREA, the Asian Real Estate Association.

The results of Investment Intentions Asia 2009 show that at 50% or twice as many investors intend to increase allocations to Asian non-listed real estate funds in the medium-term (3-5 years) versus 24% in the short-term (1-2 years).

"It is not surprising that the results of this year´s survey parallel the current investment mood in the global economy,” said Nicholas Loup, Co-Director of AREA and Chief Executive of Grosvenor Asia Pacific. “Whilst investors in non-listed real estate funds are focused on managing issues in current investments as a result of the challenging market conditions, their gaze is starting to lift to the prospect of recovery with growth in many markets. It is not a question of decoupling but that most countries went into the downturn with well capitalised banks and low levels of public and private debt and are now being led by the return of growth in China which continues to modernise its physical and fiscal infrastructure at an impressive pace.”

The survey results also highlight the reasons why investors will remain committed to Asian non-listed real estate funds in the long term. Access to expert management was the most important reason to invest by investors, fund managers and fund of funds managers. Investors also highlighted the importance access to new markets and sectors.

Respondents say the main obstacles to enter the non-listed property funds sector were market conditions and the lack of transparency. Between 42% to 65% of investors, fund managers and fund of funds managers cited market conditions and the lack of transparency and market information as impediments when investing in this sector.

“The survey shows that the underlying benefits of non-listed property funds are clearly recognised by investors. This will support the sector’s development in the longer term. AREA also recognises the obstacles and our initiatives will provide improved transparency in the market and support understanding of the issues facing the sector during these difficult conditions,” said Robert Lie, Co-Director of AREA and Managing Director of Redevco Asia.

The more optimistic medium term outlook by investors also aligns with respondents’ views that the Asian real estate markets will start to recover in 2010. Investors and fund managers were most optimistic about a recovery starting in 2010 at 67% and 72% respectively. This compares to 50% of the fund of funds managers who expected a recovery to begin in 2011. A more pessimistic outlook from fund of funds managers may be due to their tendency to invest with higher risk/return strategies in the region.

China, Australia and Japan featured in eight of the top ten location and sector pairings preferences of survey respondents. China residential and retail investments led the way for investors, while China retail, Australian office and Japan office were the focus of fund of funds managers. Japan office investments also proved most appealing among fund managers, followed by China residential.
The survey provides a guide to the expected trends of participants in the Asian non-listed real estate funds industry over the coming year. It was carried out with INREV, the European Association for Investors in Non-listed Real Estate Vehicles, and for the first time, PREA, the Pension Real Estate Association (PREA) in the United States. The survey attracted 73 responses, an increase from 65 in 2008.

The survey results are grouped according to three types: institutional investors (26% of respondents), fund managers (50%) and fund-of-fund managers (24%). A breakdown of the respondents by the location of their main headquarters shows 44% of respondents are based in Europe, 30% in Asia and 26% in the US.