Licensed by International Media Production Zone

Volume 7• Issue 2 • JUNE 2013
For more information on the exclusive Resort with
the restoration project of the historic Grand Mansion at its heart, luxu...
Discover the Gem of Istanbul
on the Princes' Islands

Opening
Summer 2014
The Grand Mansion 1872

www.princespalace.com
CONTENTS
LATEST NEWS
8	 REGIONAL NEWS
26	 ASIA PACIFIC NEWS
42	 EUROPE NEWS
54	 AMERICAS NEWS

	54	AMERICAS
		
INSIGHT
56	...
EDITOR’S LETTER

CITYSCAPE
Project Director  | Simon Cole
Editor  | Anna Amin
DESIGN  |  Aurélie Moinier
Advertising  | Ad...
MIDDLE EAST

NEWS

Sharjah’s
real estate
markeT
proves
resilient
In the first quarter of this year, Sharjah
has maintained...
NEWS

Selective
growth
in Cairo
residential
and retail
markets
in Q1 2013

MIDDLE EAST

Despite ongoing political and econ...
MIDDLE EAST

NEWS

TASWEEK signs
MoU with
Beyttürk
to introduce
top Turkish
developments
to ME markets

TASWEEK Real Estat...
NEWS

Ras Al
Khaimah
to give
new boost
to regional
tourism
Last month, Ras Al Khaimah Tourism
Development Authority (Ras A...
The Aqaba Special
Economic Zone Authority
The vision of transforming Aqaba into
a world-class business and logistics
hub h...
ADVERTORIAL

Aqaba International Industrial
Estate

Aqaba National Real Estate
Projects Co. (ANREPCO)
	 Established in Jul...
MIDDLE EAST

Market insight

STORY

MIDDLE EAST

 The prognosis for the industrial market

for the next few months is opt...
Market insight

estate project that will restore 750,000
square metres of downtown Doha, with
residential/retail areas and...
MIDDLE EAST

Market insight

commented  :
“Most commentators would agree
that the biggest challenge ahead of us in
Qatar i...
Smarter Solutions
for Places That Matter

SMART

Yardi Voyager for Retail Property Management

SMARTER

Yardi Voyager plus...
MIDDLE EAST

In-depth

STORY

MIDDLE EAST

 The prognosis for the industrial market

for the next few months is optimisti...
In-deptH

LaSalle, various factors contribute to the
return of confidence in the Dubai market,
such as economic expansion ...
MIDDLE EAST

In-depth

overseas buyers, attractive credit terms
(in the form extended payment plans for
off plan projects)...
NEW HORIZONS,
UNLIMITED
OPPORTUNITIES
COMING SOON
TO A CITYSCAPE EVENT
NEAR YOU
We Speak Your Language

T.

RERA No
MIDDLE EAST

Sector spotlight

STORY

MIDDLE EAST

 The prognosis for the industrial market

for the next few months is o...
Sector spotlight

“Since May last year, foreigners have
purchased around 19,000 properties in
Turkey. In May alone, foreig...
MIDDLE EAST

Sector spotlight

tourists came from Germany (16%) and
the Russian Federation (11%).

Bodrum - Turkey’s highe...
The Exclusive Address For Your Business in Istanbul...

Windowist Tower prides itself on being Istanbul's 'All-In-One' sma...
ASIA PACIFIC

NEWS

Broadway
Malyan’s
winning
masterplan
set to transform Kuala
Lumpur

1MDB (1Malaysia Development Berhad...
NEWS

With Gold
Prices Sinking,
What Is The
Future
Of India’s
Residential
Real Estate?

ASIA PACIFIC

With gold prices cur...
ASIA PACIFIC

Sector spotlight

Image : Nai Thon Beach, Phuket, Hunter Sotheby's

PHUKET LUXURY PROPERTY
IN HIGH DEMAND
As...
Sector spotlight

“However, the more developed infrastructure and communications system
is what really sets Phuket apart. ...
ASIA PACIFIC

Sector spotlight

 It is safe to say that

investment report, Phuket has emerged
as the country’s strongest...
ASIA PACIFIC

Green building

Image : Australian Institute of Management, Katitjin Centre, WA

IN AUSTRALIA, GREEN STARS
S...
Green building

ASIA PACIFIC

The Green Star
rating system
“Today, Green Star is certainly ascendant. While a 5 Star Green...
ASIA PACIFIC

Green building

Total investments
per real estate sector, Q1 2013
Investment Returns

12 %

CAPITALISATION R...
Green building

many exciting projects coming out of the UAE; […]and we
are keen to collaborate with like-minded organisat...
D

ue to its solid rental growth rate, relative resilience to economic fluctuations, strong demand drivers and continuous ...
STUDENT HOUSING

The number of students travelling overseas to attend
university has been rising steadily in recent decade...
COVER STORY

STUDENT HOUSING

United States –

The world’s most popular
student destination

Together with Europe, North A...
STUDENT HOUSING

COVER STORY

United Kingdom –

A mature market with
good opportunities

According to JLL, the UK is the w...
COVER STORY

STUDENT HOUSING

Europe –

France is most mature market
As mentioned previously, while the UK has a developed...
STUDENT HOUSING

COVER STORY

Australia –

Early stages of development
with favourable outlook
Over the past decade, more ...
EUROPE

NEWS

South Cyprus
financial crisis
leads overseas property
investors to
turn to Turkish
North Cyprus

Due to the ...
NEWS

Prime London
residential –
historically
steady, mature
Prime London house prices have recorded an unprecedented two ...
EUROPE

Investment

Image : Skyer office building Frankfurt, Colliers

INVESTORS’ FAVOURITE
With many European economies e...
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
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The Magazine Cityscape June 2013
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The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
The Magazine Cityscape June 2013
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The Magazine Cityscape June 2013
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Issue June 2013

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  1. 1. Licensed by International Media Production Zone Volume 7• Issue 2 • JUNE 2013
  2. 2. For more information on the exclusive Resort with the restoration project of the historic Grand Mansion at its heart, luxury Villas and branded Serviced Residences visit us at the Akdag stand T30, Cityscape Qatar, May 27 – 29.
  3. 3. Discover the Gem of Istanbul on the Princes' Islands Opening Summer 2014 The Grand Mansion 1872 www.princespalace.com
  4. 4. CONTENTS LATEST NEWS 8 REGIONAL NEWS 26 ASIA PACIFIC NEWS 42 EUROPE NEWS 54 AMERICAS NEWS 54 AMERICAS INSIGHT 56 BRAZIL | It’s not all about games 8 MIDDLE EAST INSIGHT 60 REGULAR FEATURES 60 ARCHITECTURE | Qatar’s first Passivhaus/S Cube Chalet, Kuwait 64 SUSTAINABILITY | Effectively reducing building energy consumption 68 RETAIL | The changing face of the UAE retail scene 14 QATAR | A tiny country with big plans 18 DUBAI | Is the bubble coming back? 22 TURKEY | The rising star 26 ASIA PACIFIC INSIGHT 18 71 INDUSTRY PAGES 36 COVER STORY 28 71 INDUSTRY COMMENT | Why ME investors eye London prime property 72 A DAY IN THE LIFE OF…  an architect 73 MOVERS SHAKERS 28 THAILAND | Luxury property in high demand 32 AUSTRALIA | Green stars for green buildings Student Housing | A new global asset class 74 CITYSCAPE EVENTS 42 EUROPE INSIGHT 44 GERMANY |  Investors’ favourite 48 RUSSIA | Opportunities amidst challenges 42 VILNIUS | A profile of Lithuania’s capital 48 60
  5. 5. EDITOR’S LETTER CITYSCAPE Project Director  | Simon Cole Editor  | Anna Amin DESIGN  |  Aurélie Moinier Advertising  | Adam Fox Although every effort is made to ensure the accuracy of information contained in this magazine is correct, Cityscape cannot be held responsible for any errors or inaccuracies contained within the publication. All information contained in the magazine is under copyright to Cityscape and cannot be reproduced or transmitted in any form without first obtaining written permission from the publisher. Partnership Enquiries  Simon Cole Tel. +971 (0) 4407 2640 Email  : simon.cole@informa.com Advertising Enquiries  Adam Fox Tel. +971 (0) 4408 2801 Email  : adam.fox@informa.com Editorial Enquiries  Anna Amin Tel. +971 (0) 4408 2898 Email  : anna.amin@informa.com DESIGN AGENCY  LUCKY YOU! design® www.luckyyou-design.com Cityscape PUBLISHING  Informa Exhibitions, P.O. Box 28943, Dubai, UAE Published by  Nicholas Publishing International FZ LLC 10 I CITYSCAPE I June 2013 M ost parents would agree that a good education is an essential part of providing a secure future for their children. Those who could afford to send their young adults to study overseas have always done so, seeking quality education at some of the best universities around the globe. Nothing new here, the only difference is that over the past decade, the number of international students studying overseas has drastically increased. Why? In our cover story we take a look at some of the reasons for the increase in student mobility, but more importantly, at the implications this has for the student housing sector. Strong demand for student housing has also meant that universities across the globe were unprepared to react to the rise in enrolments – a perfect opportunity for the private sector to step in and develop purpose-built accommodation which suits students’ needs. Consequently, the student housing sector has begun to attract increasing levels of interest from investors and has emerged as a mainstream investment category. Our report analyses the factors which make student property a particularly attractive asset class and puts the spotlight on the world’s most interesting markets. Turning to our region, the state of the Dubai real estate market has once again become the talk of the town. Is the market heating up? Are the pre-crash conditions returning? Opinions on this are divided which is why we decided to take a closer look at the present circumstances and have asked the experts to give us their take on the market. Further to the east in Asia, Thailand is currently on the radar of international investors, particularly the island of Phuket. As tourist arrivals to the country are increasing and more affluent travellers make their way to Phuket, luxury property is in high demand. In other global regions, Russia is an interesting example of an emerging economy with huge potential for property investment; if one can rise up to the inherent challenges the world’s largest country presents. Russia has a highly dynamic retail market and offers lucrative opportunities for investors willing to take up the challenge of doing business in a complex environment, experts say. Looking back at the first quarter of the year, it has been a very busy period for Cityscape. With three major events having passed – Cityscape Jeddah, Cityscape Egypt and Cityscape Abu Dhabi – we are pleased to say that each one of them has been a great success. We’re now looking forward to Cityscape Qatar, which will open its doors for the second time since it’s inception in 2012 from 27 – 29 May at the Doha Exhibition Centre, providing an excellent platform for fostering growth in Qatar’s booming real estate market. We hope you enjoy the read. Anna Amin Editor
  6. 6. MIDDLE EAST NEWS Sharjah’s real estate markeT proves resilient In the first quarter of this year, Sharjah has maintained a strong economic recovery period demonstrated by the expansion of various markets and industry sectors and a focus on diversification, Cluttons’ Q1 2013 Sharjah market report says. The emirate’s real estate market has always proved resilient and highly popular with investors and Cluttons notes healthy performance have seen a similar 15% increase due to strong growth in demand and a lack of quality stock. However, these increases are applicable only to new lettings as the three-year, no-increase protection law still exists in Sharjah. The office market has remained unchanged since October 2012, with average rents in the main business districts holding between AED 50 to 80 per square foot. Landlords of a number of the more prominent office towers are now offering flexible lease agreements, which has helped attract tenants and increase occupancy rates. The industrial market is the most stable real estate sector and accounts for approximately one fifth of the emirate’s across the residential, office, commercial, hospitality and industrial sectors over the past 12 months. The residential sector is witnessing a steady rise in average rents as demand outstrips supply for the first time since the global crisis. Since October 2012, apartments in popular areas such as Al Majaz, Al Nahda and Qassimiya have witnessed an average rental increase of 10 to 15%. In other desirable areas, villas GDP. The government recently has begun re-zoning parts of the industrial area close to the city centre as commercial land. As a result, it is expected that industrial tenants will move further out of the city towards areas such as Sajaa. Finally, Sharjah’s hospitality sector has also shown signs of continued growth, with a 9% year-on-year rise in guest numbers at hospitality establishments within Sharjah. Jebel Sifah is Oman’s new fully-integrated resort town Muriya Tourism Development, a joint venture between Orascom Development Holdings (70%), and Omran (30%), the tourism development arm of the Omani Government, has recently completed the core of its latest property development, the Marina Town in Jebel Sifah. Jebel Sifah is located 45 minutes from Muscat, adjacent to the fishing village of Sifah. The project is spread on a narrow 5 kilometre coastal strip and set against the backdrop of the Hajjar Mountains. At the centre of the development is the Marina Town, which sits amidst hectares of manicured gardens and an 12 I CITYSCAPE I June 2013 18-hole Peter Harradine designed Golf Course and includes several luxury resorts. Activities available at the resort and in the surrounding area include golf, tennis, snorkelling, scuba diving, jet skiing, hiking, mountain biking, diving, game fishing and sailing as well as boat trips to the nearby islands. Property ownership at Jebel Sifah is on a freehold basis and upon completion of their purchase, owners are granted Omani residency together with the financial benefits that flow from residing in Oman, including zero income, capital gains, inheritance and property tax. Investment options 1, 2, and 3 bedroom apartments available from 120 sqm; prices start at $328,000 4 categories of villas ranging from 266 – 487 sqm on plots of land starting from 1000 sqm; prices start at $700,000
  7. 7. NEWS Selective growth in Cairo residential and retail markets in Q1 2013 MIDDLE EAST Despite ongoing political and economic challenges facing the Cairo real estate market, selective growth can be seen in some residential and retails sectors in the city, says Jones Lang LaSalle’s Q1 2013 Cairo Real Estate Overview report. and wider Egyptian real estate market we are seeing selective demand and new developments in both the residential and retail sectors within this market. The office sector has also seen a number of leasing transactions in the first quarter and the residential and retail sectors have witnessed a number of new project launches and the start of several new projects including the ‘Mall of Egypt’ which will be the largest mall in the country.” Craig Plumb, Head of Research at Jones Lang LaSalle, MENA, further commented : “Egypt’s strong long-term fundamentals and the relative lack of modern real estate remain major attractions for both occupiers and real estate investors. Despite Commenting on the report, Ayman Sami, Head of Egypt Office at Jones Lang LaSalle said : “Although we are continuing to experience ongoing challenges facing the Cairo the current state of state of flux, many investors and occupiers are taking a long term view and remain committed due to the enormous potential and future possibilities offered by the Cairo market.” ABU DHABI RANKS NUMBER 10 IN GLOBAL SHOPPING CENTRE DEVELOPMENT Abu Dhabi has more than 0.8 million occupancy, we are now entering into a establish Abu Dhabi as a new destina- square metres of new retail space under new growth period for retail stock.” tion for retail in the Middle East.” development, placing the UAE capital “Over the next four years around “During this period we will see a amongst the leading cities globally for 0.8 million square metres of new mall dramatic transformation of the retail shopping centre development. Across space across nine schemes will be landscape, both in terms of supply the world, an unprecedented 32 million delivered to the market, helping to and quality. We are also expecting an square metres of shopping influx of new retail brands, centre space is currently under some of which will be openconstruction, representing a ing their first stores in the 15% increase year-on-year Shopping centre development region. Overall, we see this is (28m sqm in 2012), according to in emerging markets an exciting time for retail in the latest research from global Abu Dhabi ranks Nr. 10 in global the capital,” Green continued. property advisor CBRE. shopping centre development According to CBRE, the rapid Commenting on the Abu China is home to more than half of all the global growth of new shopping centre Dhabi market, Mat Green, Head space under construction (16.8 million sqm) development in emerging as of Research UAE, CBRE Middle Other markets experiencing substantial opposed to mature markets is East, said : “After a period of attributed to a growing middle expansion include Istanbul, Moscow, St Petersburg, significant undersupply, where class, the urbanisation of large New Delhi, Kiev, Hanoi and Kuala Lumpur many of the major malls have cities and consumer demand Source : CBRE been running at close to 100% for better quality retail. June 2013 I CITYSCAPE I 13
  8. 8. MIDDLE EAST NEWS TASWEEK signs MoU with Beyttürk to introduce top Turkish developments to ME markets TASWEEK Real Estate Development and Marketing has signed a Memorandum of Understanding (MoU) with Beyttürk Inc., a group of companies with a mission of enhancing commercial relations between Turkey and GCC countries. The agreement which was signed by projects and began its particular focus on promoting local developments to Gulf States in 2008 in line with the vision of Turkish Prime Minister RecepTayyip Erdoğan. It has been marketing a number of projects formed in cooperation Gulf companies through its subsidiary, KhaleejTurk Property. The initial focus of TASWEEK under the partnership is the promotion of Beyttürk’s ‘Dreamland’ project, a picturesque 44-unit, 26,000 sqm villa complex arising in the northwestern city of Yalova. Located at the Termal district, an area famous for its hot springs, Dreamland is strategically located just an hour away from Turkey’s three largest cities – Istanbul, Bursa and Izmir. “Turkey’s growing reputation as a real estate Beyttürk Chairman, Muhammet Ugurcan Barman, and Masood Al Awar, CEO of TASWEEK, during Cityscape Abu Dhabi 2013, will allow Tasweek to market strategic real estate projects under Beyttürk’s wings to the MENA region, acquire investment assets, and engage in joint venture development. Beyttürk, on the other hand, will constantly feed marketing and investment opportunities to its new partner and provide the necessary support to facilitate business. The company has been involved in various housing haven has been partly driven by the arrival of global players who have made the market more competitive and exposed to international buyers.Given its specific focus on the Gulf as a property partner, Turkey is a high-potential market we intend to fully explore through our alliance with Beyttürk,” said Masood Al Awar. TASWEEK exhibited unique real estate products from Beyttürk and its other global partners comprising its extensive USD 250 million portfolio during Cityscape Abu Dhabi 2013. Mounting demand pushes Dubai real estate prices up further All residential developments in Dubai, especially those with quality buildings or those in prime areas, have continued where they ended 2012 with a strong Q1 2013 performance, says the Asteco Q1 2013 Dubai real estate report. Apartment sales prices grew on average by 12% in the three months to the end of March 2013 with year-on-year growth standing at 27%. In comparison, although average villa sales prices only climbed 5% in Q1 2013, growth over the 14 I CITYSCAPE I June 2013 past 12 months averaged 24%. The performance of rental rates was also impressive, average apartment and villa rents grew by 3 and 4% compared to Q4 2012, but still managed to climb 19 and 21% respectively over the past 12 months. Office rental rates in Dubai Investments Park rose 13% to AED 485 per square metre, while JLT and Tecom rose 20 and 25% respectively to command AED 654 to AED 800 per square metre compared to the same period last year. Dubai in Q1 2013 Apartment sales prices rise 12% in the first 3 months of this year Villa apartment rentals up 4 and 3% compared to Q4 2012 Office rental rates up between 13 and 25% in selected areas Source : Asteco
  9. 9. NEWS Ras Al Khaimah to give new boost to regional tourism Last month, Ras Al Khaimah Tourism Development Authority (Ras Al Khaimah TDA) has appointed Four Communications Group to build the emirate’s profile as the GCC’s premier affordable luxury destination for leisure and adventure travel. The Ras Al Khaimah TDA was established in May 2011 to develop and promote the emirate’s tourism potential on a local, regional and international level. Its key strategic targets include increasing Ras MIDDLE EAST Al Khaimah’s number of annual visitors to 1.2 million by 2013; increasing the total number of hotel and resort rooms from 3,000 in 2012 to 10,000 by 2016; and driving the travel and tourism sector’s GDP contribution up from 2% in 2011 to 9% over the coming four years. Four Communications will support these goals through an ongoing public relations programme to promote Ras Al Khaimah tourism within the GCC, with a particular focus on the UAE and Saudi Arabia. Victor Louis, Chief Operating Officer Ras Al Khaimah Tourism Development Authority, said : “2013 is shaping up to be a landmark year for Ras Al Khaimah TDA, as we move closer towards achieving our strategic goals of 1.2million visitors and 10,000 hotel and resort rooms.” Istanbul strengthens its tourist appeal on Büyükada The island of Büyükada is the largest of the nine so-called Princes' Islands in the Sea of Marmara, near Istanbul, with an area of about 5.4 square kilometres. Today, the island has about 7,000 inhabitants, is a popular summer house vacation and hosts daily visitors from Istanbul, especially during summer time. Büyükada has a rich cultural heritage and a long tradition of royal retreats and noble hospitality. During the Byzantine and Ottoman period, princes and other royalty were exiled on the islands giving them their present name. Princess Fahrelnissa Zeid was born on Büyükada and Leon Trotsky lived there for four years. During the nineteenth century, the island became a popular resort for Istanbul's wealthy. Several cultural heritage sites such as the Ayia Yorgi Church and Monastery and the Hamidiye Mosque, built by Abdul Hamid II., various Ottoman mansions and Victorian cottages are still preserved. Today, it is a Natural Conservation Area, where no motorised vehicles are allowed. Just a 20 minute boat ride from Istanbul, the peaceful island is best explored by foot, by riding a bicycle or in a traditional horse carriage. Due to its unique and charming appeal, the island attracts luxury Princes' Palace hospitality developers such as Resort Spa Akdağ Tourism Construction, Opening in spring 2014, Princes' Palace which is currently developing the Resort Spa is currently being developed exclusive Princes' Palace Resort by Akdağ Tourism Construction. Spa on Büyükada. Located on Büyükada, the project is On the back of increasing an exclusive, internationally branded tourist arrivals to Turkey, and luxury resort, encompassing a historic to Istanbul in particular, the grand mansion, villas, serviced country’s hospitality market residences, a hotel and beach club. is experiencing exponential growth and is said to offer lucraFacilities include private sea access and Yacht tive investment opportunities Pier, seawater pools and sea hammams, a over the coming years. landscaped park, a helideck and horse carriage. June 2013 I CITYSCAPE I 15
  10. 10. The Aqaba Special Economic Zone Authority The vision of transforming Aqaba into a world-class business and logistics hub has become a reality Aqaba Development Corporation (ADC) The Transport Network • King Hussein International Airport • The New Port of Aqaba • Road and Railway Networks
  11. 11. ADVERTORIAL Aqaba International Industrial Estate Aqaba National Real Estate Projects Co. (ANREPCO) Established in July,2006 as a private shareholding company Governed by a Board of Directors, and owned by (NREC) 70% and (ADC) 30%. ANREPCO was founded to serve present and future needs of investors and businesses in real estate, warehousing, cold stores, developed land, commercial and, light medium industrial facilities in Aqaba. ANREPCO responsible for developing ADC Warehousing Industries Park  Located (12km) south east of Aqaba city center, (6km) from Aqaba Containers Port, and just near the Trucks Road that connects Aqaba city with neighboring Saudi Arabia to the south, and Amman city to the north.  Total area of the project is (1.5) million square meters of developed land equipped with necessary infrastructure networks.  The Project is developed as a Gated Business Park, with many supporting services for business located within.  Facilities and areas will include :  Modern and qualified warehousing units with flexible areas for storage activities.  Developed and serviced plots of land for industrial and storage activities.  Developed Stander Factory Buildings (SFBs) for light medium industries with flexible areas  Developed and serviced plots of land for open storage.  Reserved areas for cold storage with flexible areas  Reserved areas for commercial activities (offices and retail stores).  Reserved areas for services and maintenance
  12. 12. MIDDLE EAST Market insight STORY MIDDLE EAST  The prognosis for the industrial market for the next few months is optimistic. Rising demand for modern warehouse space results in the decrease of vacant space level in certain markets which may increase rental rates.  A TINY COUNTRY WITH BIG PLANS As it prepares to host the 2022 soccer World Cup, Qatar has several large scale infrastructure and real estate projects under development which are set to offer long-lasting benefits to the local real estate market. However, as investors turn their eyes to the tiny Gulf state, the pressure mounts on Qatar to keep up with its ambitious plans as proposed. W ith an expected economic expansion of 5.2% (IMF World Economic Outlook April 2013), Qatar is likely to have the highest growth rate among GCC countries in 2013. This is on the back of a multi-billion dollar infrastructure investment plan that implements the National Development Strategy 2011-2016. According to the Qatar National Bank, infrastructure spending is expected to reach about $30 billion per annum for the years 2013-2015. Between now and 2022, Standard Chartered expect almost $115 billion of government expenditure on infrastructure projects and the FIFA Cup, a spokesman of the global bank said. Some of Qatar’s major infrastructure projects include the Hamad International Airport ($17.5 billion), the New Doha Port ($7.4 billion) and the Qatar Highway Programme ($8.1 billion). Hamad International Airport will feature two of the longest runways in the world and will be able to handle 50 million passengers after it has 18 I CITYSCAPE I June 2013 completed its ultimate stage of development. The New Doha Port will be built at Mesaieed, with its first phase scheduled to be completed prior to 2022 while the Qatar Highway Programme will consist of 280 km of dual four-lane roads with a 12 km Lusail Expressway connecting Doha to Lusail City. The country is also building a 7.5 km highway linking Doha and Dukhan. On the real estate front, Lusail City ($45 billion), one of the Gulf’s largest real estate developments, is currently under development and will be able to house up to 200,000 people. In addition to residential and commercial areas, the development will also contain hotels and golf courses. Its most iconic feature will however be the 80,000-seat Lusail Stadium, where the championship match of the World Cup soccer tournament will be played. Qatar is also set to build nine stadiums and renovate three existing facilities before 2022. Msheireb ($6.4 billion) is another ambitious real
  13. 13. Market insight estate project that will restore 750,000 square metres of downtown Doha, with residential/retail areas and hotels, built in a style reminiscent of traditional Qatari architecture. The real estate sector benefits A strong economy, general preparations for the World Cup and the ongoing development in line with Qatar’s 2030 Vision are impacting positively on the Gulf state’s real estate market. “Qatar’s strong economic performance, driven by high energy prices, and the government’s investments as well as preparations for FIFA 2022 have been recently driving real estate demand in the country. This applies to all real estate sectors  : residential, commercial and retail,” a real estate expert in Qatar said. “The levels of oversupply in Doha’s office market that we’ve seen in 2011 are quickly eroding due to increased demand. This demand is primarily being driven by large government and financial institutions, but is also the result of strong activities in the construction and engineering sector – which is greatly attributed to 2022 World Cup related activities,” the expert further commented. The present conditions are said to offer attractive opportunities for investors, particularly in the real estate sector. “The real estate market has never been more favourable to investors than it is today. On the residential side, the increase in population, due to recruitment of personnel from outside of Qatar by newand expanding businesses, continues to drive demand for residential accommodation,” the expert explained. A major real estate development in Qatar is The Pearl-Qatar, a mixed-used Island project developed by United Development Company (UDC). According to a UDC spokesperson, ‘The PearlQatar’ has been experiencing a steady increase in residents and number of retail MIDDLE EAST  The real estate market has never been more favourable to investors than it is today. On the residential side, the increase in population, due to recruitment of personnel from outside of Qatar by new and expanding businesses, continues to drive demand for residential accommodation.   outlets since its launch in 2009; the firm expects growth to continue leading to 2022 as investor interest in the Qatari market heightens. “Added to these factors, the expected climb in tourism activities leading to 2022 will have a tremendous impact on the hospitality real estate market. All this bodes well for investors interested in exploring opportunities in the Qatari market,” the Qatar expert said. Money is not the issue As one would imagine while looking at the current development plans, cost is not a major concern for Qatar. In 2012, the Gulf state retained its ranking as the word’s richest country, with its per capita income soaring to an incredible $106,000, the Institute for International Finance (IIF) has reported. Qatar Investment Authority (QIA), with assets over $115 billion, was ranked 12th among sovereign wealth funds in the word. But how is the country coping with the delivery of all the planned mega projects? Initially scheduled to begin operations last year, Qatar keeps postponing the opening of its new international airport. Design changes have led to major delays in building the new airport, which is now estimated to cost $3 billion more than originally anticipated. From a logistical point of view, the new seaport for example, whose first phase is due to be completed in 2016, will have to ensure to be able to handle the influx of all the building materials needed for construction in Qatar. The availability of skilled labour provides another challenge, experts say. Rod Stewart, Qatar Managing Director for Atkins, June 2013 I CITYSCAPE I 19
  14. 14. MIDDLE EAST Market insight commented  : “Most commentators would agree that the biggest challenge ahead of us in Qatar is logistical - bringing the required quantity and quality of resources to the market – by which I mean not only the vast amounts of plant, labour and materials, but also access to the number of skilled people with the knowhow to deliver major, complex projects.” “This will sometimes mean going beyond having people based in Qatar, to being able to package work efficiently to tap into global skills based in other locations. In reality, we need a combination of the two things  : expertise in Qatar and the ability to effectively and efficiently manage work flow around international organisations.” Long lasting benefits Images : The Pearl Qatar, UDC Despite challenges with regards to the delivery of some of Qatar’s large scale projects in time and on budget, experts believe the World Cup will have hospitality sectors. Finally, new investments related to the a positive long-lasting Cup can help set the stage for further growth in the future. impact on the country’s This will bode well for Qatar’s plans to boost its tourism real estate market on the and become a pole of attraction in the region, leading to whole. further development in residential and commercial real estate “For the next 10 years, projects,” the expert added. the real estate market is set to benefit from curWorld class city Doha rently planned spending Atkins’ Rod Stewart shares this positive view, saying that related in general to World the legacy of the World Cup is a key factor in the planning Cup preparations. Conand development process, as it was with the London 2012 tinued economic growth Games, for which Atkins was the official engineering design would be the primary services provider. result, which means more “The fact that the World Cup is a milestone along the way expatriates will make Doha to the National 2030 Vision is testament to the fact that the their home and it also government has a very well thought out strategy, which will means more purchasing transform Doha into a truly world class, sustainable city with power for both the people a fully integrated transport system, high quality real estate, a vibrant public realm and dynamic social infrastructure. For of Qatar and expats alike,” the real estate expert said. Qatar’s citizens it will improve standards of living, while putting “This naturally translates Doha in the top tier of global destinations,” Stewart concluded. into increased activities in the real estate, retail and 20 I CITYSCAPE I June 2013
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  16. 16. MIDDLE EAST In-depth STORY MIDDLE EAST  The prognosis for the industrial market for the next few months is optimistic. Rising demand for modern warehouse space results in the decrease of vacant space level in certain markets which may increase rental rates.  IS THE BUBBLE COMING BACK? Confidence is returning to the Dubai real estate market. Mounting demand has pushed prices up further in the first quarter of 2013 and several new mega real estate projects have been announced over the past few months. Although at first sight it seems that the pre-crash conditions have returned, experts say the Dubai market has moved on and matured. F or the first time since mid 2008, all sectors of the Dubai real estate market are positioned in the recovery stage of their market cycle, says the Jones Lang LaSalle Q1 2013 Dubai market overview. The residential market in particular has maintained its strong performance of 2012, with villas and apartments showing similar increases in sale and rental prices in the first quarter of 2013. According to Asteco, apartment sales prices grew on average by 12% in the three months to the end of March 2013 with y-o-y growth standing at 27%. Although average villa sales prices only climbed 5% in Q1 2013, growth over the past 12 months averaged 24%, the firm says. The performance of rental rates was also impressive  : average apartment and villa rents grew by 3% and 4% compared to Q4 2012, but still managed to climb 19% and 21% respectively over the past 12 months, Asteco says. “The overall outlook is positive with demand and rates 22 I CITYSCAPE I June 2013 expected to continue to grow. However, this will also mean that some tenants and buyers will be priced out of certain buildings or communities,” commented John Stevens, Managing Director of Asteco Property Management. “Prices are not only being driven by tenants relocating, Dubai is also attracting new tenants and those expatriates here are still tending to take a longer-term view of living in Dubai,” Stevens added. “In terms of supply and demand, Dubai is still benefiting from the Arab Spring and the Euro crisis, which was brought into sharper focus recently with the Cypriot banking crisis. Good quality stock is gradually being reduced while the length of time that advertised units stay on the market now is also shortening,” he further added. Return of confidence In addition to the improved performance of selected real estate projects in 2012 and 2013, according to Jones Lang
  17. 17. In-deptH LaSalle, various factors contribute to the return of confidence in the Dubai market, such as economic expansion (especially in trade, tourism and transport), growing population and employment, Dubai’s status as ’safe haven’ and regional hub as well as positive investor sentiment towards Dubai. With investor confidence on the rise, a number of large scale projects have been announced recently. The most ambitious of these is the Mohammad Bin Rashid City (MBRC), including the world’s biggest shopping mall, around 100 hotels, a public park and a Universal Studios theme park, which is supposed to be developed over a decade, JLL says. Dubai is also one of 5 shortlisted cities for the Expo 2020, which would act as a major boost to the real estate market south of the city and could draw as many as 25 million visitors to the emirate. Investment - Dubai scores over other markets JLL’s latest Middle East Investor Sentiment Survey (published in November 2012) shows that Middle Eastern investors prefer Dubai as an investment destination in the MENA region, with sentiment towards the emirate having improved significantly over the past year. “The well-developed infrastructure, improved transparency and high quality of life have all contributed to putting the Dubai real estate market back on track. The other area where Dubai scores over other markets in the MENA region is its higher stock of completed, investment grade properties. While there remains a general shortage of such opportunities to satisfy the level of investor demand, the emirate offers a greater range of completed and income producing products than other markets in the region, most of which remain at earlier stages of their development cycle,” the survey says. However, international investor confidence towards Dubai remains polarised MIDDLE EAST  In our view, the Dubai market has however moved on and matured. This provides hope that the excesses of the last speculative boom can be replaced by a period of slower but more sustained growth in demand and prices.   into two camps, Craig Plumb explains. “High net-worth individuals and private companies from the ME remain major investors in Dubai and have increased the level of investment over the past 12 months. On the other hand, there remains little or no interest in the Dubai market from more institutional investors from Europe or the US. These investors attach a higher risk profile to Dubai than local investors and are therefore willing to pay lower prices,” he says. In an effort to increase confidence, Dubai recently proposed a draft investor protection law. Experts however are unsure about the potential impact of the law, especially with regards to attracting overseas investment. “Passing the proposed investor protection law would be a great start, but would not itself be sufficient to attract major institutional investors,” Plumb explained. “Improvements to the transparency of the market (releasing more data on transaction levels and prices) would be far more beneficial,” he added. Unsustainable growth? Dubai’s positive market performance, the announcement of new mega real estate projects and the improvement in investor confidence have sparked talks over the potential emergence of another ’bubble.’ The recently proposed mortgage cap by the UAE Central Bank is an example of this concern. “At first sight, it appears that many of the conditions that led to the unsustainable growth in real estate prices in 2006/2007 have returned. These include strong demand from cash rich June 2013 I CITYSCAPE I 23
  18. 18. MIDDLE EAST In-depth overseas buyers, attractive credit terms (in the form extended payment plans for off plan projects) and discussion about instant profits for those lucky enough to secure units in selected projects that can then be quickly on sold,” Plumb commented. “In our view, the Dubai market has however moved on and matured. This provides hope that the excesses of the last speculative boom can be replaced by a period of slower but more sustained growth in demand and prices. This would be in line with the experience of other overseas markets where the amplitude clauses into their sale and leasing agreements that require minimum holding periods or further periodic payments (in order to discourage the rapid on sale or flipping of units), the analyst points out. “While we remain hopeful that these factors could help the market avoid the excesses of the last speculative boom, the extent to which this will be achieved clearly remains to be seen. It would be a real shame if the lessons from the previous period of unsustainable growth are not heeded. “Dubai being Dubai, the new projects being launched are as ambitious as ever. We are however seeing signs of a more mature and considered approach, which is only going of subsequent market cycles reduces to benefit the long term health and credibility of the real as markets mature,” Plumb further estate sector. The key to the success of individual projects commented. and the future performance of the overall market will be the JLL believe that the exuberance of the adoption of a realistic phasing strategy in line with market previous cycle can be prevented, allowdemand,” Plumb concluded. ing the Dubai market to shift up a gear without becoming overheated. Plumb names three reasons for this  : limitations on the availability of finance, high levels of new supply entering some sectors of the market and improvements to the legal and regulatory framework, providing more protection to investors. “While not all the 45,000 residential units scheduled for completion in 2013/2014 will actually be delivered in this timeframe, there remain significant levels of new supply which will provide investors Dubai market facts Q1 2013 with choice of completed units Prime office rental rates and dampen the pressure for are recovering price increases for off plan Increase in residential units,” he said. sale and rental prices Furthermore, although the Widening gap between primary new ’investor protection law’ and secondary shopping malls has not yet been formally Strong performance for hotel approved, there are tighter sector with 88% occupancy rates controls on the level of down Source  : JLL Dubai Real Estate Market Overview Q1 2013 payments that developers can claim from purchasers prior to commencing construction, Plumb explains. Now, some developers insert 24 I CITYSCAPE I June 2013
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  20. 20. MIDDLE EAST Sector spotlight STORY MIDDLE EAST  The prognosis for the industrial market for the next few months is optimistic. Rising demand for modern warehouse space results in the decrease of vacant space level in certain markets which may increase rental rates.   THE RISING STAR The Turkish real estate market is transforming rapidly. Last year, the country at the crossroads between Europe and Asia has secured its first investment-grade credit rating. As tourist arrivals are increasing, international hotel groups are expanding in the country, reaping the benefits of strong market fundamentals coupled with a pleasant Mediterranean climate and renowned Turkish hospitality. D espite the economic slowdown in 2012, the Turkish economy still presents a stronger economic outlook compared to other European countries. Unemployment in the country is also declining as a result of the economic growth observed over the past few years, the Colliers International Turkey Real Estate Review H1 2013 stated. According to data published by the Turkey Statistics Institute, in November 2012 the unemployment rate was 9.4%. “With the expectation of a recovery in the global markets, Turkey’s economic growth for 2013 is forecasted between 4% - 4.5%. In 2013, the unemployment rate is expected to go down to 8.9% as an impact of the continued GDP growth,” Colliers said. In 2010 and 2011, Turkey had experienced a remarkable GDP growth of 9.0% and 8.5% respectively. 26 I CITYSCAPE I June 2013 Investment In May last year, in an effort to further boost Turkey’s thriving real estate market and to encourage increased foreign investment in the country’s residential property, the Turkish Government passed a new law concerning foreigners buying properties in Turkey. The law put an end to reciprocity and increased the amount of land foreigners can purchase in Turkey from 2.5 hectares to 30 hectares. Colliers says that in 2013, a sales boost from Middle Eastern buyers is expected as a result of the change on the reciprocity law. A boost in domestic demand is also targeted through achieving low financing costs and mortgage loan rates, the firm added. Since enactment of the bill, the Turkish real estate sector has witnessed an increase in foreign property acquisitions, says Vedat Aşci, Chairman of the Board of Directors, Astaş Holding, a major luxury real estate developer in the country.
  21. 21. Sector spotlight “Since May last year, foreigners have purchased around 19,000 properties in Turkey. In May alone, foreign real estate acquisitions in Turkey reached USD 1.1 billion, four times the total amount than in 2011,” he commented. To further boost investment, the Turkish Government is developing a scheme to ease visa and residence permit restrictions for overseas real estate buyers. Turkey also secured its first investment-grade credit rating by Fitch Ratings late last year, signifying the country’s international economic respectability. According to Jones Lang LaSalle, this resulted in record levels of stock index and bond prices and offered a substantial boost to the government, which has long coveted an elevation to investment grade. The firm says that it is expected that this will be further strengthened by possible upgrading by other rating agencies. “As the positive perception on Turkey’s stability for investments grows, more international capital is expected to flow in real estate in Turkey. We believe that the real estate sector in Turkey will continue its positive trend in 2013,” Colliers added. Points of attraction Reforms to property laws, years of solid economic growth and political stability, a positive outlook alongside a young population all have contributed to Turkey’s real estate boom, explains Aşci. On top of that, several advantageous factors contribute to the fact that Turkey is emerging as an extremely attractive destination for international real estate investment. “Turkey’s location at the crossroads of Europe and Asia makes it a country of significant geostrategic importance while its growing economy and diplomatic initiatives have led to the country’s recognition as a regional power,” Aşci said. “In addition to this, Turkey’s coastal areas offer a temperate, pleasant climate with hot, dry summers and mild to cool winters. Turkey also has a very diverse culture that blends various elements of MIDDLE EAST  Since May last year, foreigners have purchased around 19,000 properties in Turkey. In May alone, foreign real estate acquisitions in Turkey reached USD 1.1 billion, four times the total amount than in 2011.   Islamic cultures with Western traditions, and is renowned for its gracious and generous hospitality,” he further commented. Tourist destination Turkey Aşci says that due to the above mentioned assets of Turkey, international hotel groups are currently pushing forward to acquire more market shares in Turkey and to satisfy the increasing demand for hotels and holiday accommodations. “In the last ten years, leading luxury real estate developers and international hotel groups entered the Turkish market. Due to their strong and growing economy as well as favourable demographics and upward trending consumer spending, Istanbul and Bodrum in particular provide great prospects. Here, property prices are rising rapidly on the back of an increased quality of life,” Aşci commented. Currently the government is pursuing an eager plan to position Turkey as a major global tourist destination. In order to celebrate the 100th anniversary of the Turkish Republic, a goal has been set to reach 50 million tourist arrivals by 2023, generating USD 50 billion of revenue. Istanbul has also applied to host the 2020 Olympics, which would act as a further catalyst to bring more tourists to Turkey on the whole. According to statistics published by the Ministry of Tourism, Turkey recorded a total of 31,782,832 incoming visitors in 2012, out of which 32.4% visited Antalya and 29.5% visited Istanbul. While the number of incoming visitors to Turkey increased by 1% compared to previous year on the whole, the number of visitors to Istanbul has increased by 16.5% in 2012. According to the distribution by nationalities, the major share of incoming June 2013 I CITYSCAPE I 27
  22. 22. MIDDLE EAST Sector spotlight tourists came from Germany (16%) and the Russian Federation (11%). Bodrum - Turkey’s highend tourist destination Often referred to as the ’St. Tropez of Turkey’, Bodrum is emerging as Turkey’s number one high-end tourist destination, attracting discerning travellers from all over the world. Catering to the very top-end of the market, Astaş Holding and Mandarin Oriental Hotel Group have recently announced their collaboration to develop the highly exclusive The Residences at Mandarin Oriental, Bodrum. Set on 600,000 continental Europe, CIS and the Middle East. With the recent amendments to the property law, the developer witnessed increasing investment particularly from the Middle East. “Investing in Turkish real estate is a valuable option for those who are seeking a good overseas investment opportunity. It will not only give people the ownership of a beautiful property, but also an investment that will yield greater returns in the future,” Aşci concluded. square metres of mostly rehabilitated land, the development will consist of 98 villas and 116 residences ranging from and will have a 2 kilometre coastline with three private bays. “Mandarin Oriental, Bodrum and The Image : The Residences at Mandarin Oriental, Bodrum Residences at Mandarin Oriental, Bodrum will set a benchmark for other international brands as the most luxurious resort and residence project in Europe and the Mediterranean region. Our goal is to support Bodrum in its mission to become the leading resort destination of Europe’s south coast, where people can relax, entertain and revitalise in a luxurious environment,” Aşci commented. The Residences at Mandarin The project is expected to Oriental, Bodrum be completed in 2013 with a Location | Bodrum, Turkey targeted opening date of the Operator | Mandarin Oriental Hotel Group first half of 2014. Prices for Developer | Astaş Holding villas start at USD 3 million, Site | 600,000 sqm, 2 km coastline while apartments are available Residences | 98 villas (560-760 sqm), starting from USD 1.2 million. 116 apartments (2-,3- and 4-bedrooms) It will be the first property in Facilities | Top-notch Mandarin Oriental Turkey to be managed and services, golf courses, spa fitness centre, branded by Mandarin Oriental tennis, pools, trekking paths, three private beach Hotel Group. bays, in-residence catering/private chefs, helipad Aşci says to date, 50% of the Opening date | H1, 2014 project has already been sold, attracting buyers from Turkey, 28 I CITYSCAPE I June 2013
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  24. 24. ASIA PACIFIC NEWS Broadway Malyan’s winning masterplan set to transform Kuala Lumpur 1MDB (1Malaysia Development Berhad) has appointed a global team to partner with local planners to create a game-changing masterplan for Bandar Malaysia, Malaysia. The team is led by global architecture, urbanism and design practice Broadway Malyan, supported by world-class design and engineering teams from Arup and Sinclair Knight Merz, in collaboration with local planner Arah Rancang Malaysia. The winning team was selected from a total of six finalists based on concept proposals which perfectly capture the essence of 1MDB’s vision and commitment for a mixed-use development that will help transform Kuala Lumpur into one of the world’s best global cities. 1MDB Real Estate Sdn Bhd Chief Executive Officer Dato’ Azmar Talib said : “Broadway Malyan and Arah Rancang Malaysia’s concept masterplan provides a strong foundation for the next stage, which is to further develop Bandar Malaysia to become the benchmark for sustainability and liveability in the region, in line with the national vision of making Kuala Lumpur the world’s top 20 most liveable cities by 2020. The 196-hectare Bandar Malaysia is envisioned to be one of the most desirable environments to live, learn, work and play in the Asian region. The strategic real estate development project aims to combine a vibrant mixed-use community with a commercial district to foster creativity and innovation. It will be an international destination for culture and the arts showcasing Malaysia’s diverse culture. Dato’ Azmar said : “Bandar Malaysia will be an inclusive, public transit-oriented city that is designed as a walkable community through a series of safe, secure and pleasant pedestrian and cycling networks, set against a backdrop of well-articulated open spaces and greenery. As part of 1MDB’s commitment towards providing affordable housing, Bandar Malaysia aims to be the yardstick for sustainable and affordable urban housing within Malaysia.” Asian real estate prices for 2013 remain positive In 2013, real estate prices in the region are predicted to stay in the upward trend not just because of the rising prices of commodities but also the growth expectations in the region and the underlying demand from end-users, occupiers and investors, says the Colliers Asia Real Estate Forecast for 2013. Looking at the prospective GDP growth in the region, China is going to be the key driver which is predicted to generate a significant positive spillover to the rest of countries in Asia. 30 I CITYSCAPE I June 2013 Economic growth of China in 2013 is predicted to be strong, mainly because of massive investment into a number of infrastructure projects, Colliers say. Meanwhile, the prevailing relaxed monetary policy is going to sustain in 2013 given the rate of price inflation has been staying at low level. Comparing 2013 to 2012, the only difference is that the growth rate of real estate prices is expected to taper off slightly from 5 - 9% per year in 2012 to 2 -5% per year in 2013. Asia real estate forecast 2013 Offices | Driven by cost-savings and the continued flight to quality Industrial | Intraregional demand spilling over from China Source : Colliers International
  25. 25. NEWS With Gold Prices Sinking, What Is The Future Of India’s Residential Real Estate? ASIA PACIFIC With gold prices currently on the descent, many investors are asking themselves if residential real estate prices will follow, says Anuj Puri, Chairman Country Head, Jones Lang LaSalle India. The performance of residential real estate as an asset class as one may at first assume, Puri believes. “In the short term, residential real estate prices in different cities will either remain steady see minor upward or downward fluctuations. In the long term, they will rise again. The fundamentals of the India real estate story are extremely strong. Even in this turbulent economic environment, India remains the cynosure of interest by global MNCs and investors who see the limitless potential of a young, growing economy, a wealth of highly trained workforces across the manufacturing, IT/ITeS and services industries. All this translates into assured job creation, and therefore demand on the residential real estate market,” Puri commented. is doubtlessly dependent on the macroeconomic factors that also dictate the performance of other asset classes, including gold. Nevertheless, the correlation between gold and real estate prices is not as distinct However, he also said that Indian residential real estate is not the best route for short-term investors and that people need to stay invested for the mid-to-long term in order to garner the best possible returns. Brisbane Industrial Leasing Activity Hits 10 Year High Industrial leasing activity in Brisbane is at a 10 year high, with the total volume of leasing transactions jumping 40% to 598,385 sqm for the 12 months to March 2013, according to the latest research from Savills. The marked increase from the previous 12 month period puts current leasing levels in the Brisbane industrial market at 19.5% higher than the five year average. Helen Swanson, Savills QLD Associate Director of Research, said all major industrial precincts across Brisbane recorded an increase in the total area leased over the last year, with the Southside leading the way with 45% of total leasing activity. She said leasing demand was generated from a diverse range of tenants, with the transport and logistics sector accounting for 31%, closely followed by engineering with 29% and the remainder spread across a variety of sectors. However, Ms Swanson said the significant overall increase in industrial leasing activity during the last Brisbane industrial market Volume of leasing transactions up 40% y-o-y Leasing demand generated from a diverse range of tenants Shortage of prime warehouse and office space Rising vacancy for secondary industrial buildings Source : Savills Australia year was not solely attributable to major pre-commitments but was also the result of stronger leasing demand from smaller-to-medium-sized businesses. She said bottom line pressures were an important driver in the market, with many companies focused on more efficient use and consolidation or disposal of property. This had seen more companies that were traditionally owner-occupiers become tenants in order to efficiently maximise cashflow to support their businesses. “Cash flow is king at the moment and many companies, especially smaller businesses, prefer the cost advantages associated with leasing over purchasing. Given current economic conditions, many small businesses don’t have the surplus equity or confidence to commit to long term ownership,” Ms Swanson said. June 2013 I CITYSCAPE I 31
  26. 26. ASIA PACIFIC Sector spotlight Image : Nai Thon Beach, Phuket, Hunter Sotheby's PHUKET LUXURY PROPERTY IN HIGH DEMAND As tourist arrivals to Thailand are increasing, more and more overseas buyers have their eyes set on the popular Southeast Asian holiday destination. Renowned as ’the pearl of the Andaman’, Phuket’s luxury residential market is currently attracting particular interest from overseas buyers as investment potential is said to be high. A ccording to the Tourism Authority of Thailand (TAT), Thailand received over 22 million tourists in 2012 and intends to reach 24.5 million this year. The island of Phuket has emerged as a particularly popular holiday destination in the region. In 2012, Phuket International Airport (PIA) received an estimated 9.4 million travellers, having exceeded its original handling capacity of 6.5 million passengers per year. To cater to the increasing demand, Emirates Airlines launched a direct service to Phuket a few months ago, making the island its second Thai destination in addition to Bangkok. Strong demand on the Dubai-Phuket service has even prompted the airline to consider increasing the route’s capacity with a second daily flight. In order to be able to cope with the influx of tourists, the Airports Authority of Thailand has announced a THB 5.7 billion expansion of the PIA. The expanded airport will 32 I CITYSCAPE I June 2013 see the addition of an international passenger terminal, boosting its capacity to 12.5 million travellers a year. With an increase of 13% in international arrivals to Phuket from 2011, the island by far outstrips other popular locations such as Koh Samui, Chang Mai and Pattaya. “For many years Phuket has been the number one holiday destination in Southeast Asia and far outstrips its nearest rival of Bali as well as Thailand’s other resort destinations,” says Andrew Hunter, Managing Director of Hunter Sotheby’s International Realty, Phuket. “Phuket is more appealing because it is large and diverse enough to cater to many tastes and holiday wishes. There are busy centres like Patong, yet you can escape from the masses and find yourself on an almost deserted beach in a small restaurant, like stepping back in time.”
  27. 27. Sector spotlight “However, the more developed infrastructure and communications system is what really sets Phuket apart. There is an international airport with direct flights to the region, the Middle East, India, Australia and Europe. In addition, the roads are better developed as is the general amenity and provision of services, ranging from good quality restaurants, 8 international standard golf courses to 3 marinas and generalentertainment,” Hunter further says. The prime property market is booming As a result of Phuket’s growing popularity among affluent tourists, the island is set to see a rise in demand from overseas buyers. Currently, the emphasis is on wealth rather than the mass market and investors focus on luxury condominium beach properties in particular. “The typical buyer of luxury property in Phuket is a regional expat or a local of one of the key financial and commercial hubs, in particular Hong Kong, Singapore, Dubai, Beijing and Shanghai. Over 50% of the buyers are regional expats, many of whom work in the financial services industry, or support that industry in legal and accounting services,” Hunter explains. He adds that in the past, many buyers came from Europe, however with the rise of the Thai Baht versus the British Pound and the Euro, investments from Europe have decreased. Instead, with recently launched direct flights from India, China and Dubai, Sotheby’s is witnessing more buying interest from locals from these areas. “Many of these individuals have already invested in property in the world’s ASIA PACIFIC  Given the current rate of growth, airport expansion plans and an increase in affluent Asian travellers with greater spending power, Phuket is poised to retain its position as one of Asia’s most popular tourist and investment destinations.   metropolitan areas like New York, London and Hong Kong, and are now buying lifestyle ahead of investment,” Hunter says. Some agents on the island say that capital gains for luxury condominiums are as high as 10% anticipated return if bought off plan and sold on completion.Hunter however suggests more moderate estimates. “I do know owners of luxury property who are generating circa 8% gross, probably 5% net after management, brokerage, fees and taxes, but these are rare items. Most owners use the properties themselves through the peak period, Christmas, New Year, Chinese New Year, Easter and so this waters down their rental potential. However, it is safe to say that a holiday home in Phuket can afford you not only a beautiful lifestyle retreat, but also one that pays for itself and generates some cash on the side and there is a lot to be said for that. If tourist numbers continue to grow, which they are forecast to, the property yields should remain very healthy,” he says. Some 5-star resort properties with owner usage on the island provide a 6% return per annum, Hunter says. Sotheby’s currently have the 3-bedroom Banyan Tree Presidential Villa for sale at USD 3.88 million, which offers 60 days owner usage and pays a net income of USD 214,500 per annum until June 2019. But it’s not just Phuket’s high-end residential market that’s benefitting from the increase in tourism to the island. According to Jones Lang LaSalle’s latest Thailand hotel June 2013 I CITYSCAPE I 33
  28. 28. ASIA PACIFIC Sector spotlight  It is safe to say that investment report, Phuket has emerged as the country’s strongest hotel market. As at year-to-date December 2012, Phuket recorded occupancy of 72.4% along with an Average Daily Rate (ADR) of THB 3,902 (USD 133) which resulted in Revenue per Available Room (RevPAR) of THB 2,824 (USD 96), above other markets in Thailand, with the exception of Bangkok’s five-star hotel market. As at y-t-d December 2012, Phuket’s RevPAR was 10.1% above the same period last year (Jones Lang LaSalle Thailand Hotel Investment Market, January 2013). a holiday home in Phuket can afford you not only a beautiful lifestyle retreat, but also one that pays for itself and generates some cash on the side [...]. If tourist numbers continue to grow, which they are forecast to, the property yields should remain very healthy.   Bright prospects The future is looking positive for the island’s tourism related real estate market. “Despite the significant growth in hotel supply, with 2,756 additional rooms anticipated by 2015, the increase in visitor arrivals has provided demand and the outlook remains positive. Given the current rate of growth, airport expansion plans and an increase in affluent Asian travellers with greater spending power, Phuket is poised to retain its position as one of Asia’s most popular tourist and investment destinations,” the JLL report says. However, with increased popularity also comes more responsibility. “As the island is becoming more popular, this puts pressure on the infrastructure. Both the local and national government must be very careful to continue to invest in the island and to manage the tourist industry,” Hunter concludes. 34 I CITYSCAPE I June 2013 Image : Private Pool Villa, Hunter Sotheby's, Phuket
  29. 29. ASIA PACIFIC Green building Image : Australian Institute of Management, Katitjin Centre, WA IN AUSTRALIA, GREEN STARS SHINE THE BRIGHTEST Having been actively promoting and implementing sustainable real estate practices for over a decade now, Australia has emerged as a global leader in sustainable real estate. In just 10 years, the country’s Green Building Council has driven a substantial reduction in the environmental impact of buildings, while achieving cost savings and improving the industry’s skill level in general. L ater this year, Dubai is set to introduce its first mandatory green building rules, highlighting the increasing importance sustainability gains in the global real estate sector. AUSTRALIA'S GREEN HISTORY In Australia, green building practices form an important part of real estate development since more than a decade now, making the land down under a global leader in green building. Robin Mellon, Executive Director of Advocacy and Business Services of the Green Building Council of Australia (GBCA), explains how the industry has evolved in the continent : “In Australia, the green building movement only gained momentum after the Sydney Olympics in 2000 received worldwide recognition as the ‘Green Games’. With venues and facilities that established new 36 I CITYSCAPE I June 2013 benchmarks in design excellence and best practice sustainability, Australia’s property and construction industry demonstrated that green buildings were achievable,” he commented. “But at the time, the industry had few metrics or agreed methodologies to measure green building, and few assessment tools or benchmarks of best practice. There was no organised approach to knowledge-sharing or collaboration. Nor was there any way for the industry to promote or profit from green building leadership,” Mellon added. Then, in 2002, the GBCA was formed, following the footsteps of other green building councils in the UK and US. A year later, the GBCA launched Australia’s first holistic environmental rating system for buildings, Green Star.
  30. 30. Green building ASIA PACIFIC The Green Star rating system “Today, Green Star is certainly ascendant. While a 5 Star Green Star rating (representing ‘Australian Excellence’) might have seemed unachievable in 2003, today we have nearly 570 Green Star certified projects around Australia, and a further 500 registered to achieve Green Star certification,” Mellon commented. As Australia’s only holistic, national, independent rating system for buildings and communities, a Green Star rating provides independent verification that a building or community project is sustainable, Mellon explains. “Green Star rating tools are available for a range of building types - from offices to factories, from schools to shopping centres, and from hospitals to hotels. We have rating tools that assess the sustainability of base buildings at the design or construction phase (known as ‘Design’ and ‘As Built’ ratings),” Mellon said. In the office sector, Green Star-rated buildings currently account for 20 percent of the CDB market, rising to one in four buildings in Adelaide and one in three in Brisbane. There are also more than 120 education facilities either certified or registered to achieve Green Star certification, Mellon says. Rate, educate and advocate The GBCA plays an important role in driving sustainability forward in Australia. It does this through rating of buildings and communities with Green Start rating tools, through educating organisations and individuals on sustainable building practices and through working with local, state and federal governments to develop policies and programs which support this thriving industry, Mellon explains. “In just 10 years, the GBCA has driven a substantial reduction in the environmental impact of buildings, while achieving cost savings, improving occupant health and productivity and up-skilling the industry.”  However, we know there is much to learn from other countries, and we are impressed and inspired by the many exciting projects coming out of the UAE;[…] and we are keen to collaborate with likeminded organisations in the Middle East to drive innovation in both our markets.   Today, the GBCA has 60 employees in five different locations and more than 700 member organisations across the breadth of the construction and property industry while having also trained more than 40,000 people in the industry (1,400 of whom are currently Green Star Accredited Professionals). Green buildings as profitable investment Australian ‘green’ office buildings continue to deliver enhanced investment returns, recent data shows. According to The Property Council/IPD Australian Green Property Index, released in March, Green Star rated office assets showed an annual total return of 10.6% for 2012. In line with previous results, green office buildings continued to outperform the total office property sector, comprised of rated and non-rated assets, which reported an annual return of 9.7%, the Index says. Over the last 2 years to December 2012, A-grade office buildings with a Green Star rating delivered an annual return of 11.2% versus a 10.1% return for All A-grade office buildings (see figure 1). James McGregor, Energy Systems Manager, Division of Energy Technology at the Commonwealth Scientific and Industrial Research Organisation (CSIRO) commented : “The benefits of improved indoor environmental quality, reduced operating costs due to lower energy and water consumption, and the ability to credibly evaluate and compare the performance of green buildings has led to improved marketability of green buildings and this is being reflected in the returns being achieved by green buildings.” McGregor recently spoke at the Dubai Green Building Seminar, organised by Austrade as part of the Australia Unlimited 2013 campaign, which was aimed at strengthening mutual ties in the green building, investment and education sectors between Australia and the UAE. June 2013 I CITYSCAPE I 37
  31. 31. ASIA PACIFIC Green building Total investments per real estate sector, Q1 2013 Investment Returns 12 % CAPITALISATION RATES 11.2 % 10.1 % 10 % 7.6 % 7.5 % 7.7 % 7.6 % 8% 7.5 % 6% 7.4 % 4% 7.3 % 2% 7.2 % 0% A- Grade Office A- Grade Green Star A- Grade Office A- Grade Green Star 7.1 % Capital returns (lhs) Cap rates (rhs) Income returns (lhs) Challenges – then and now “One of the major challenges in the early days was to demonstrate the business case for green building. We published ‘The Dollars and Sense of Green Building’ in 2006 to demonstrate the opportunities of green building – from marketing benefits to return on investment, and from reputational equity to productivity. At the time of publication, we had less than 10 buildings certified and 44 registered. There was certainly a cost premium associated with Green Star,” Mellon commented. However Mellon says this perception has changed over time, and today, there is a general understanding in Australia that green buildings are affordable and achievable, costing no more to build than non-green buildings. Commenting one more recent challenges, McGregor said : “Currently much of the focus of Australia’s green building sector is directed towards the design of high performance new buildings. However, the current Australian building stock is increasing by about 1% annually (by the addition of new buildings at a rate of about 2% and the demolition of existing 38 I CITYSCAPE I June 2013 Total returns (lhs) Image : IPD buildings at a rate of about 1%). The challenge therefore is in developing strategies to transform Australia’s existing building stock.” “The existing buildings in Australia provide a significant opportunity for substantial energy and water savings. The transformation of the existing building stock will require the development of new knowledge in building adaptation and will require proactive involvement of the facilities management sector to identify and implement sustainable opportunities,” McGregor added. The expert also identifies challenges for Australia’s green building sector that relate to the understanding and evaluation of the environmental impact of building materials. He says that while to date, most of the emphasis has been on improving the operational aspects of buildings such as energy and water consumption, attention should also be given to embodied carbon reduction in construction projects from 2013 and beyond. THE FUTURE When compared to other nations around the world, Australia has clearly emerged as a leader in sustainable building practices. “However, we know there is much to learn from other countries, and we are impressed and inspired by the
  32. 32. Green building many exciting projects coming out of the UAE; […]and we are keen to collaborate with like-minded organisations in the Middle East to drive innovation in both our markets,” Mellon concluded. Australian green building in a global perspective When compared to other nations around the world, Australia has clearly emerged as a leader in sustainable building practices. “Australia was one of the world’s earliest adopters of green building practices - and that leadership is evident today, as we have one of the most influential green building councils of the 96 around the world. The GBCA’s international reputation has helped Australian companies to position themselves as leaders in the global green building market,” Mellon said. One indicator for this is the Dow Jones Sustainability Index which evaluates performance of the largest 2,500 companies listed on the Dow Jones. The GPT Group (one of Australia’s major property management and development companies) was announced the world’s most sustainable real estate company in the 2012/2013 Index while in ASIA PACIFIC previous years, Australian companies Lend Lease, Investa and Stockland have all topped the list, the expert added. “However, we know there is much to learn from other countries, and we are impressed and inspired by the many exciting projects coming out of the UAE. Australia’s geography and remote location make international connections a priority for sparking innovation and we are keen to collaborate with like-minded organisations in the Middle East to drive innovation in both our markets,” Mellon concluded. Image : GPT Group June 2013 I CITYSCAPE I 39
  33. 33. D ue to its solid rental growth rate, relative resilience to economic fluctuations, strong demand drivers and continuous imbalance of supply and demand, student property attracts strong investor appetite and is no longer regarded as a niche sector, but has emerged as an asset class in its own right. In our special report, we look at some of the world’s hottest markets. 40 I CITYSCAPE I June 2013
  34. 34. STUDENT HOUSING The number of students travelling overseas to attend university has been rising steadily in recent decades, and this trend is set to continue, global real estate consultancy Knight Frank believe. Just as the world’s economies have become more globalised, with the relaxation of trade barriers, education has also become a global commodity, with students now seeking out the best educational institutions across the globe. As a result of this, tertiary enrolments have expanded significantly worldwide in the past decade. According to Jones Lang LaSalle’s 2012 Student Housing Report, global tertiary enrolments rose from 98 million in 2000 to 165 million in 2011, marking an increase of 68%. “This growth occurred on the back of the establishment of inter-regional relationships, internationalisation of higher education and labour markets as well as universities’ strategies to counteract decreases in government funding by COVER STORY seem to be the key drivers of student mobility, JLL say. With English being the international business language, it is no surprise that study destinations where English is the language of instruction (US, UK, Australia and Canada) are dominant student destinations. Establishment of student housing as an asset class The rise in the number of mobile students across the globe has spurred the need for quality student housing. Given that universities in English-speaking expanding their markets internationally,” the JLL report says. Another factor that lies behind the rise in student mobility is the expansion of the new ‘middle class’ in emerging economies, meaning that there is a growing pool of potential overseas students, Knight Frank add. It is forecasted that the number of international students could more than double again by 2025 (OECD). countries have been the dominant receivers of international students, it is not surprising that they are also the global leaders in the provision of student housing, JLL say. Purpose-built student housing started in the US and the UK in the early 1990s, both of which are developed student housing markets. However, the sector is only in early stages of development in Australia and immature Asia is the key sourcing region elsewhere, JLL say. The majority of students pursuing their degrees overseas Turning to the core of our report, let’s take a come from Asia. In 2009, over half (52%) of international look at what makes student housing a particularly students in OECD destinations (which capture the bulk of attractive investment opportunity compared to global demand) came from Asia, followed by Europe (23%), other commercial property classes. Africa (12%), South America (7%), North America (4%) and According to JLL, the student housing sector’s Oceania (1%), the JLL report says. appealing attributes include steady income and Strong economic growth and the expansion of the middle solid rental growth, less cyclic performance, class in developing Asia are spurring demand for higher constant supply and demand imbalance, high education. By 2020, more than 7 million students will study occupancy, strong demand drivers, low-risk profile outside their home country, the bulk of which will come and short-term lease structure. from developing Asian economies such as China and India, Daniel Baum, Surveyor, Student Housing at Jones it is predicted. Lang LaSalle London, commented : “The student accommodation sector’s ability to Key selection criteria perform well in recent years is particularly attracSeveral different factors influence students in choosing tive to investors. While retail, office and industrial their study destination, however the language of instruction, properties are struggling to deliver positive returns, quality of education and the availability of housing options the safety of university leases and high demand for relatively low supply of rooms has resulted in prices remaining stable at worst, growing in many cases.” Baum added that while yields from commercial real estate typically suffer during an economic downturn, student numbers tend to be resilient or even increase when the economy and job market are weak. With student property, owners also benefit from annually rising rents that are uncommon in all other property sectors, he said. June 2013 I CITYSCAPE I 41
  35. 35. COVER STORY STUDENT HOUSING United States – The world’s most popular student destination Together with Europe, North America captures the bulk of the international student market (75%) and belongs to the leading education providers worldwide (JLL). The development of the US student housing sector was fuelled by appealing demand fundamentals, JLL report. In the 1995-2009 period, total university enrolments rose by 6.2 million (+43%) or on average 2.6% annually, placing upward pressure on the student housing market. In the 2010-2020 period, total enrolments are likely to increase by 13%, to 23 million, presenting a favourable outlook for the sector (JLL). Student housing has been one of the and year-out. It's a definite global trend, as evidenced by the billion-dollar portfolio bright spots in the US commercial real transactions breaking out in Europe recently. According to data from JLL, the sector’s average yield in June 2012 was 6.58%. estate market - total annual sales in this niche have been estimated to be as much as $2.5 billion, as demand continues for Future opportunities newer facilities that better fit the needs of As a developed student housing market, the US offers very good investment today’s students, Colliers report. opportunities through consolidation, development and acquisition, JLL say. The Managing Director of Colliers’ Student fragmented ownership offers an opportunity for consolidation among key market Housing Group, Dorothy Jackman said : players and institutional interests looking to diversify their portfolio, the firm says. “Purpose-built student housing has On the development front, there are many on-campus development opportunities become much more sophisticated having due to the limited funding capacity of universities to start new student projects which to meet the needs of universities and create opportunities for private investors, developers and operators to fill the gap. students alike.” Acquisition opportunities may arise with non-specialised developers exciting “Amenities packages continue to be a the sector. JLL say that residential developers frequently get involved in the focus for students, and developers are student housing sector due to higher returns than in apartments, but often lack delivering state-of-the-art fitness centres, the necessary operational expertise. swimming pools, Jacuzzis, tanning beds, Currently, private investors own around 48% and operate around 65% of the total media rooms and, in some cases, concierge purpose-built market in the US (JLL). services. The Class ‘A’ student property of today delivers those amenities one used to associate only with 5-star hotels,” she further commented. Warren Dahlstrom, President of Colliers’ Investment Services Group in the US, added : Student housing has grown in scale and sophistication to become an asset class in its own right. Investors have responded to the sector’s unique benefits and resilience, year-in 42 I CITYSCAPE I June 2013
  36. 36. STUDENT HOUSING COVER STORY United Kingdom – A mature market with good opportunities According to JLL, the UK is the world’s second most popular destination for overseas students. Supply of the country’s purpose-built student accommodation is mainly concentrated in cities where popular universities are located, such as London, Oxford, Cambridge, Manchester, Nottingham, Leeds, Liverpool and Bristol. London has the largest student base but also the lowest provision of student housing which has translated into strong rental growth, JLL say. The firm’s research shows that in the 1995-2009 period, rental values in the UK grew by 156%, almost three times more than that of its closest competitor (retail at 54%). See Figure 1. Attractions for 2013 are expected to remain strong compared to other property classes as the student sector continues to be in high demand from all kinds of investors.” The exceptional performance of the UK student housing sector is obviously driven by the strong growth in student enrolments. “The student population in the UK is growing with applications up 3.5% year-on-year in 2012, hence fresh demand every year and a track record of strong rental growth make this a particularly atThroughout 2011, student accommodation in the UK has tractive asset class,” Roberts of Savills commented. performed exceptionally well as an asset class compared to “The sector benefits from high occupancy levels traditional investments and has outperformed every other with no empty rate liabilities and limited void costs. commercial property class, having provided average returns A move towards higher transparency of operating of 11.5%, Knight Frank say. costs has also improved market liquidity. In addiAccording to JLL, “2012 returns were reported at 9.6%, and tion, occupational demand for student housing is although fallen from the 2011 return, this is still over twice traditionally less affected by the economic climate, the overall property return figure of 4.3% for 2012. Returns unlike other sectors, and with rising global recognition of the high standard of UK higher education, the student housing market is an appealing sector for buyers,” Roberts added. Similarly to the US, good opportunities in the UK currently exist through consolidation, development and acquisition, JLL say. FIGURE 1 | RENTAL VALUE GROWTH BY SECTOR, THE UK 175 Student accomodation 150 Retail Index 1994 = 100 125 Office 100 Industrial All properties 75 RPI*(Taken RPI 50 at September) 25 0 1995 1997 1999 2001 2003 2005 2007 2009 Source : IPD, NUS, Jones Lang LaSalle June 2013 I CITYSCAPE I 43
  37. 37. COVER STORY STUDENT HOUSING Europe – France is most mature market As mentioned previously, while the UK has a developed student housing market, the sector is relatively immature elsewhere in Europe. “Speaking very generally, the European market is where the UK sector was approximately 15 years ago with a supply and demand imbalance, less quality product and a relatively small number of developers and investors focused on this market,” Roberts of Savills commented. “However, each country’s market characteristics are different. The most active “In terms of investor opportunities, demand for living space is currently higher European student housing markets are than supply across Germany and in each market segment, from cheap student halls France, Ireland (primarily Dublin), Germany, to high-end apartments. At the moment, the majority of investors and developers Austria and the Netherlands, followed by are targeting students with an above-average income, however, there is a greater Spain and Italy,” Roberts added. shortage of stock for students with an average and below-average monthly income. This housing gap still needs to be filled and consequently presents an opportunity “Overall, we perceive France as the most for investors,” he explained. mature student housing market in Europe In fact, student numbers are on the rise in the entire region which obviously has after the UK for several reasons. These implications on the student housing sector. include the variety of product available, “Combined student numbers in Germany, France, the Netherlands and the UK are the ability for individual investors to gain forecast to grow by over 3% between now and 2025, bringing with it an increased access to the market and the fact that need for student accommodation and therefore greater development within Europe,” developers in France are building product Baum of JLL commented. with a management lease wrapper in place that provides investors with a guaranteed Future opportunities return,” he further commented. Due to the relative immaturity of its various student housing markets, continental According to the expert, there is a strong Europe has strong potential for expansion in the sector, JLL say. Overall, the provision imbalance between supply and demand in (total enrolments over total supply) of student housing in European countries is France, with an average student housing far below that of the UK (around 23%). For example, in France it is on average 11%, provision rate of approximately 11%. Spain 7%, and just 3% in Italy, providing an opportunity for established players with But it’s not just France’s market that a scalable operational platform to access the market and reap the benefits, JLL say. is attractive to investors. Despite the challenges in the wider economy, student registration figures in Germany for example Image : Newington Court, UK, Savills have remained robust, creating a widening housing gap in the country. “Living and accommodation costs are relatively low in comparison to other countries and Germany’s higher education system is regarded as one of the best in the world, particularly for engineering and other technical studies,” Roberts said. 44 I CITYSCAPE I June 2013
  38. 38. STUDENT HOUSING COVER STORY Australia – Early stages of development with favourable outlook Over the past decade, more international students have chosen to study at Australian universities. Between 2002 and 2011, international student enrolments in Australian higher education institutions almost doubled, reaching 242,350 (JLL). This is not surprising given the fact that Australia’s main universities are ranked among the 100 most reputable global universities. The country also enjoys proximity to the key sourcing region Asia; between 2000-2011, the majority of enrolments (67%) came from the Asian countries of China, Malaysia, India, Indonesia, Singapore, Hong Kong and Vietnam (JLL). See Figure 2. “Australia is the third most popular destination for overseas students; enrolments have doubled over the past decade. With this increase in international students comes the need for an increased number of purpose built beds; there are currently only 41,000 beds for 240,000 students,” Baum commented. “Australia will naturally benefit from its proximity to Asia and the international students that reside on the continent. We anticipate that investors in Australia will see the opportunities that were seen in the UK over the past decade and forecast that the sector will grow into a major alternative investment property class,” Baum further commented. However, Savills mentioned that the country’s international education sector is currently going through a period of change. In 2012, international student enrolments in Australian universities continued to decline since adjustments were made to Australia’s migration policy and the rise of the Australian dollar. The Australian dollar has had a direct effect on cost of living in Australia compared with alternative destinations. International students studying in Australia face significantly higher costs than domestic students, with university fees often three times higher, Savills say. Future opportunities The rapid rise in overseas student numbers has created a strong demand for high-quality student housing in Australia, providing great opportunities from a development perspective. From an institutional investment level, the Australian market is considered to be around 10 years behind mature markets in providing adequate accommodation, which appeals to potential investors, JLL say. The firm believes that the fragmented nature and relative infancy of the student housing sector in the country provide an opportunity for investors to reap the benefits of an early stage. FIGURE 2 | KEY SOURCING COUNTRIES, AUSTRALIA'S INTERNATIONAL STUDENT MARKET 70% 60% Vietnam 50% Hong Kong Singapore 40% Malaysia 30% Indonesia 20% India 10% China 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: AEI June 2013 I CITYSCAPE I 45
  39. 39. EUROPE NEWS South Cyprus financial crisis leads overseas property investors to turn to Turkish North Cyprus Due to the South Cyprus financial crisis, the north of the island is becoming a rapidly expanding investment haven in contrast to the stricken European South, says North Cyprus property developer Evergreen Developments, who claims its sales are up monthly by 350%. Previously a lesser-known investment zone, the Turkish Republic of Northern Cyprus (TRNC) now boasts rising property values in key investment areas, as well as new tax-free zones and high Turkish and local TRNC bank interest rates of up to 9.5% for overseas investors, Evergreen says. Together with its attractions of the mild Mediterranean climate, low property prices, a brand new transport and social infrastructure, TRNC is gaining attraction among international investors. “Of course we would like to see the whole of Cyprus in a positive financial situation” says Angela Henderson, Property Marketing Manager for Evergreen Developments. “But there is no doubt that an unexpected side effect of this unfortunate crisis has been to create new interest in the North. Now, as the global media spotlight is on the banking crisis in the European South, our challenge is to ensure that investors worldwide recognise the banking and property system in Turkish North Cyprus is safe and has no link to the South.” James Swanson, Product Development and Marketing Manager at the local Near East Bank is also witnessing a massive opportunity for business expansion in an area where banks are outside the jurisdiction of the European Union. “We experienced a 24% growth last year as the fastest growing bank in the TRNC. […]We are putting in place new incentives for overseas investors to invest with us, as informed investors recognise that our banking system is totally separate from the troubled European South.” Czech industrial space market ruled by optimism According to Cushman Wakefield, slight optimism has returned to the Czech industrial property market in the first quarter of 2013. “More than 195,000 sqm of modern industrial space was leased in the first three months of this year. This is 26% more than last year and as much as 38% more than in the recordbreaking year 2010,” says Jaroslav Kaizr, Head of Cushman Wakefield’s Industrial Letting Team. “In year-on-year terms, the amount of vacant space decreased by 50,000 46 I CITYSCAPE I June 2013 sqm which results in about 276,000 sqm being available to tenants at present. This is just 6.6% of all existing industrial space in the Czech Republic,” he further says. The outlook for 2013 is positive. “As long as there are no major economic shocks, we can expect supply and demand to be on the level of 2011. That was one of the best years in the history of the industrial property market,” Kaizr concludes. Czech industrial market Q1 2013 Leasing up 26% from Q1 2012 More quality supply needed Vacancy rate down to 6.6% Positive outlook for 2013 Source : Cushman Wakefield
  40. 40. NEWS Prime London residential – historically steady, mature Prime London house prices have recorded an unprecedented two and a half years of steady growth, according to latest analysis from international real estate adviser, Savills. The firm’s prime London residential property index has recorded single-digit annual price growth for the tenth quarter in a row, marking a period of stability not seen since the index was established in 1979. Double digit annual price growth has Image : Hamptons International not been seen across the all prime London market since the heady days of 2009/10 when the world’s wealthiest individuals transferred their assets from stocks and shares into real assets. Since then, EUROPE demand for prime London property has been strong, from both wealthy Londoners and the 34 percent of prime London buyers who are from overseas, but has not resulted in overheating. Transaction numbers are still below their previous long-term average and balanced supply and demand dynamics signal a steady market, Savills says. Average price growth across all prime London has totalled a relatively modest 17.6 percent since the end of 2010. Annual price growth trended down marginally in 2012 and now stands at 4.7 percent. Yolande Barnes, Director of Savills World research, commented : “In historic terms, this rate of growth looks steady for a prime residential market and much less volatile than some other prime world markets. It flies in the face of those who claim the market is overheating. French real estate investment performance remains positive with a 6.3% return According to the IPD France Annual Property Index, released last month, the total return for all French property stood at 6.3% for 2012, with capital growth at 0.7%. After subdued growth in 2011, French property performance continued to slow. While 2011 saw a moderate increase in property values, in 2012 values stalled; average capital growth for the last three years now stands at 2.4%pa. Meanwhile income return remained relatively stable, thanks to rising rents and stable vacancies. The consistency in income return has helped to reinforce real estate’s attractiveness as an investment, despite its weaker performance than the other asset classes in 2012. Offices recorded a total return of 5.6% in 2012, a performance that was brought down by negative capital growth of -0.3%. However, the divergence of pricing between Paris and the rest of France continues to grow. For the Paris CBD, property values Canadian office markets at a glance Total return for all property 6.3% Return for offices down to 5.6% Logistics and industrial sectors the weakest at 3.8 and 3.9% return respectively Retail return up to 7.8% Source : IPD increased by 3.0%, reflecting the strong appetite of investors for less risky assets, while values fell outside Paris. The logistics and industrial property sectors registered the weakest performance in 2012, at 3.9% and 3.8% respectively. Their values have consistently fallen over the last five years, with a cumulative decline of 25.3% for logistics and 18.1% for industrials. Conversely, these sectors registered the highest income return at 7.4%. Residential values continued to rise in 2012, but more slowly than in the previous year, resulting in a capital growth of 3.1%. Finally, retails rose in value in 2012, although more moderately than in 2011, with capital growth standing at 2.1% for the year, bringing their total return to 7.8%. June 2013 I CITYSCAPE I 47
  41. 41. EUROPE Investment Image : Skyer office building Frankfurt, Colliers INVESTORS’ FAVOURITE With many European economies either stagnant or in serious decline, Germany is regarded as a safe haven by many property investors. While office properties in the country’s ’Big6’ cities are the most favoured products, it is the residential sector that provides the highest returns. I n 2012, the German commercial market recorded the highest investment volume for the last five years at EUR 25.31 billion (USD 33.36 billion as of 17.4.13), marking an 8.5% increase compared to an already strong 2011, says the latest Savills European Investment market report. 51% of the country’s total investments went into the top six German cities, namely Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Munich and Stuttgart. Overall, EUR 12.9 billion (USD 17 billion) was invested in the Big6 cities, marking a 20% rise y-o-y, Savills says. POINTS OF ATTRACTION Given the fact that most of Europe’s economies are stagnant or in decline with a bleak outlook, this is quite a remarkable achievement. “The German investment market benefits from the Eurozone crisis due to several reasons. On one hand there is still a huge demand for office, retail and industrial spaces 48 I CITYSCAPE I June 2013 from a wide range of business sectors. Additionally, the latest economic forecasts for Germany were adjusted and are more positive for 2013 and 2014 than before. On the other hand, a significant number of investors are looking for worthwhile investment opportunities in the context of low interest rates and a lack of investment alternatives,” says Ignaz Trombello, Head of Investment of Colliers International, Germany. “Foreign investors, who were involved in eight out of ten of the year’s biggest deals, invested approx. EUR 9.6 billion [USD 12.6 billion] in Germany, around EUR 1 billion more than in 2011,” Trombello adds. Savills anticipates the German commercial real estate market to remain strong in 2013 and expects growing interest from international investors.

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