By Kathleen Chu, Bloomberg
TOKYO — Asia provides a “safe haven” for property investors as returns decline on U.S. and European assets because of subprime mortgage losses, said Jones Lang LaSalle Inc., the world’s second largest commercial real estate broker.
“The region could be a beneficiary of the fallout as investors reallocate funds from the U.S. and Europe toward Asia Pacific in search of higher growth opportunities on a risk- adjusted basis,” Jane Murray, Asia Pacific head of research at Jones Lang LaSalle, said Tuesday in an e-mailed report.
The world’s biggest banks and securities firms wrote down US$45 billion of assets this year and cut 10,000 jobs because of the collapse of the market for mortgages made to borrowers with poor credit. Commercial real estate transactions fell in the U.K. and the U.S. after defaults on subprime pushed up borrowing costs, creating turmoil in financial markets.
Global direct real estate investment in Asia gained 14 percent to US$54 billion in the first half of the year, compared with the year-earlier period, LaSalle said in the report. Asian deals are about a third of the volumes in the Americas or Europe.
“Although regional investment volumes are still a comparatively low proportion of global direct property investment, interest levels are very high and we foresee the continuation of rapid growth in volumes,” said Murray.
Japan remained the dominant market in Asia for international investors in the first half, accounting for more than half of investment in the region, Jones Lang LaSalle said.
Capital values gained 8.7 percent in Japan during the quarter to 3.96 million yen per square meter, Jones Lang LaSalle said.
Goldman Sachs Group Inc., the world’s largest securities firm, bought the building that houses Tiffany & Co.’s flagship store in Tokyo in August for 37 billion yen (US$335 million), or about 54.45 million yen per square meter, the highest price paid since the burst of the bubble economy in the early 1990s, according to Jones Lang LaSalle.
“Limited supply, coupled with robust demand, is expected to sustain the rising tend of rentals. Investment yield is anticipated to increase,” said the report.
Average monthly rents for grade A office buildings advanced 3 percent from the second quarter to 54,882 yen per tsubo (US$150 a square meter), the 13th straight quarter of gains, Jones Lang said.
Grade A office buildings are sites with total leasable floor area of more than 10,000 square meters and more than 800 square meters per floor, according to Jones Lang LaSalle. The buildings should be no older than 25 years.