Tuesday, September 25, 2012

Strong investor interest in retail assets despite economic gloom

SHANGHAI: The global economic uncertainty has not dampened investors' appetite for investments in retail properties.

According to a report by property consultant Jones Lang Lasalle, total investment in retail assets globally in 2011 was US$122.5 billion, up 53 per cent from 2010.

With some US$50 billion worth of retail real estate traded globally in the first half of this year, Jones Lang Lasalle expects retail investments this year to match last year's levels, given a healthy deal pipeline for the second half of the year.

The Asia Pacific region has been a bright spot for the retail investment market sector.

Investments in retail real estate in the first half of 2012 rose 22 per cent to US$12.4 billion.

David Hand, international director and head of Investment at Jones Lang Lasalle China, said: "Retail... is a very defensive stock, because people still need to buy materials, goods and products. People still like to enjoy even (if) the economy is depressed slightly in the more mature markets."

While China and Brazil have attracted strong investor interest, they have also proven to be challenging markets.

Kumar Tharmalingam, CEO of Malaysia Property Inc, said: "Dealing with (the) local government, planning laws and land issues... Finding a local partner is the biggest challenge. Because some of the local partners have issues which they don't surface until you become partners."

The report also created an index identifying those countries with the strongest retail real estate momentum in terms of consumer, retailer, developer and investor activity.

China and India unsurprisingly top the index, followed by Indonesia, Turkey, Brazil and Vietnam.

Mr Hand said: "There are some surprising countries (starting to come out). Kazakhstan for one, has great potential... Peru in South America is another one. A lot of development (is) about to start."

Still, China is projected to be Asia's largest retail investment market worth US$15 billion a year by 2020.

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