An important real estate theme that has developed since the aftermath of the recent financial turmoil is the rapid growth of APAC’s invested stock, which by definition and according to DTZ refers to the value of commercial real estate held by investors. These stocks are typically of good quality and are attractive as an income generating asset. Given Asia remains in a better shape economically and with the relative stability of its financial markets, invested stock grew by 13% in US dollar terms as compared to 8% in Europe and 0% in North America.
Within Asia, China unsurprisingly leads this expansion as its invested stock reached USD 1.3 trillion in 2011, not far behind Japan’s USD 1.4 trillion which remains APAC largest market, home to circa 36% of the region’s total invested stock as represented in exhibit 2. Based on current pace of growth, China should by 2013, become Asia’s largest invested market despite a vast majority of existing investment capital still domestically sourced. The potential for further stock growth is clear as China has yet to truly access the queue of capital for its domestic market. On the other hand, this easing of capital flow restriction (in bound as well as out bound) may potentially redirect some of the domestic capital across the region with the gateway cities; e.g. Singapore, Hong Kong and Sydney likely to be the immediate beneficiaries. Over the medium term, this should bring overall invested stock in the region closer aligned with absolute GDP size (within APAC). That said, the immediate question on investors’ minds, particularly from a portfolio allocation viewpoint, should be how to gain access to China.
Source : UBS AG