Comment: Light at the end of property's tunnel?
Whisper it softly, but analysts are starting to wonder whether green shoots may be coming into view in the property markets that played a role in leading the world economy into recession.
Reports this week that a consortium including Indian steel magnate Lakshmi Mittal and the ruling family of Abu Dhabi are mulling a GBP10bn bid for UK property company British Land have been interpreted as a sign that shrewd investors are calling the bottom of the market. The company, which lost nearly GBP4bn in its most recent financial year, has seen its share price rise 32 per cent over the past month.
On the other side of the Atlantic, Houston-based real estate management and investment firm Hines has launched an IPO for Hines Global Reit, a public non-traded real estate investment trust, which seeks to raise up to USD3.5bn. The fund, which will invest in commercial property in the US and internationally as well other types of real estate and debt securities, aims to 'capitalise on current distress in the market to acquire attractive properties at historically low prices'.
Adds Hines Global Reit president Charles Hazen: 'In this challenging market, we see many opportunities on the horizon. We plan to make strategic acquisitions and dispositions, and will be seeking out undervalued assets as well as aggressively pursuing opportunities in markets around the world, which may offer additional diversification as well as attractive risk-adjusted returns.'
Other leading players in the global market are also detecting reasons for at least cautious optimism. A new report from global property giant CB Richard Ellis acknowledges obvious indicators of weak market conditions but also identifies positive developments halfway through 2009, including initial signs of recovery in some regions.
While hesitant to predict a sustained upturn amid a continuing decline in prime office rents across the continent, the report notes that activity in the European investment market rose from EUR11.6bn in the first quarter of the year to EUR13bn in the second, with activity notably quickening in the London investment market 'as investors target the markets that have seen greatest price corrections'.
CBRE also says that prices may have touched bottom in some cities across Asia, although rental prices remain in the doldrums and some cities are still seeing falling occupancy rates, while in the Pacific region there are signs that property markets are stabilising after 18 months of turmoil, with both consumer and business confidence improving. The news remains less good from the US, where vacancy rates across all commercial property segments continue to grow.
CBRE chief economist Raymond Torto argues that the speed of recovery is likely to vary according to the level of damage inflicted on country's banking systems, with those most burdened with weak credit institutions facing a longer recovery period than others. Nevertheless, his firm's analysis is another pointer that across the globe, the notoriously cyclical real estate sector may now be poised for a fresh upswing. After the pounding taken by investors over the past two years and more, it can't come soon enough.
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