The Magazine Cityscape June 2013

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, luxury Villas and branded Serviced
Residences visit us at the Akdag stand T30,
Cityscape Qatar, May 27 – 29.

Discover the Gem of Istanbul
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Opening
Summer 2014
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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

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.

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Anna Amin
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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

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


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

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

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


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

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.


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

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

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


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

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,


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


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MIDDLE EAST

In-depth

STORY

MIDDLE EAST


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


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

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


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


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STORY

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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.


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.

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


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,


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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.


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

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.


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


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.”

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


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.


Image : Private Pool Villa, Hunter Sotheby's, Phuket

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


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.

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.


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


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

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


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.


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

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


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


43

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
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.


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.


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


45

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


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

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%.


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


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.

The Magazine Cityscape June 2013

The Magazine Cityscape June 2013

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