Markets to Watch
London — “London repriced very sharply,” says Tony McGough, global head of forecasting at DTZ in London. “So much of the bad news is out of the way and rents dropped so much that even if we haven’t yet hit bottom, we’re close.” Investors are buying up office properties and shopping centers at 75 percent less than the market peak in 2007, DTZ reports. A drop in British currency also has attracted foreign investors looking for bargains. Prime office rents in London already have fallen 31 percent, and DTZ expects them to drop even further.
Brazil — Hotels are the investment of choice in this country, which has the world’s 10th largest economy and fifth largest population, according to Jones Lang LaSalle. Revenue per available room should grow throughout 2009, much of it driven by an emerging middle class. Experts predict that Brazil’s economic downturn will be shorter and less painful than other developed markets, primarily because the country has a variety of trading partners. Canada’s leading pension adviser has committed $250 million to develop, acquire, and manage institutional-quality Brazilian office properties, shopping centers, and distribution centers in partnership with the country’s largest real estate firm.
Canadian Hotel Project Pipeline
Stage, 2Q09, % change 1Q08 to 2Q09
Under construction, 72, -19
Starts in next 12 months, 55, -41
Early planning, 70, -16
Total pipeline, 197, -26
Source: Lodging Econometrics
Investors Look at Repriced Markets
Markets outside of the U.S. are repricing more rapidly and attracting the greatest investor interest, says Jacques Gordon, global strategist for LaSalle Investment Management. “The U.K. is way out ahead. We do not see the U.S. teed up to be No. 2 in the repricing process,” he said at the Reuters Global Real Estate Summit. “We are seeing Australia, even signs of Japan and Germany, out ahead in terms of repricing. But in the United States, commercial real estate players — buyers, sellers, and lenders — have been taking other avenues to avoid selling at prices most experts believe are half of what they were at their peaks in 2007.” Recent transactions in Munich, Germany, Paris, Singapore, and Melbourne, Australia, indicate that values in those cities have fallen by 50 percent to 70 percent from their peaks.