Foreign Investment

International Report(4)

Moscow Office Values

Sector December 2007 December 2006
  Average Sales Price (USD/SQ. Meter) Yield Average Sales Price (USD/SQ.Meter) Yield
CBD 16,458 7.5% 8,205 8.8%
All submarkets 11,365 7.5 - 9.5% 6,978 9.5%

Source: Cushman & Wakefield

Industrial and Retail Developers Look Overseas

While the U.S. economy takes a dive, industrial and retail developers cast their hopes on foreign markets to keep their portfolios growing, according to a discussion at the Deutsche Bank 2008 Real Estate Outlook conference. Executives from real estate companies such as ProLogis, Kimco, and First Realty Industrial Trust agreed that strong demand for their product still exists outside the U.S. Industrial developer ProLogis has operations in 20 countries and see opportunities developing in Western Europe, China, and Japan, which is just coming out of its 15-year recession during which few new industrial properties were built.

Retail developers are looking to Mexico, where they see pent-up demand in a country with only 800 shopping centers, compared to the U.S. which has 48,000. Kimco is the largest owner of Mexican retail properties, with 20 of its current 55 developments occurring in Mexico.

European Office Markets Strong

Property markets across Europe have been strong, particularly in France and Germany, which are experiencing economic expansion, according to the 2008 NAI Global Market Report. Double-digit rental increases for office space have occurred in a number of European cities including the following:

  • Oslo, Norway: +65%
  • Warsaw, Poland: +30%
  • Moscow: +25%
  • Madrid, Spain: +20%
  • Budapest, Hungary: +17.5%
  • Paris: +10%

World’s Most Expensive Office Space

Yearly rent psf as of 3Q07

1. London (West End) - $329
2. Mumbai, India - $190
3. London CBD - $181
4. Moscow - $181
5. Tokyo (Inner Circle)- $179
6. Tokyo (Outer Circle) - $155
7. Paris - $127
8. New Delhi - $127
9. Dublin, Ireland - $114
10. Hong Kong - $106
11. Singapore - $102
12. Manhattan (Midtown) - $101

Source: CB Richard Ellis

London’s West End, the world’s most expensive office rental market, is home to the Swiss Re office building, known locally as the Gherkin, which sold last year for a record £600 million, or about $1.1 billion.

Canada for Sale

Investors spooked by the uncertainty in U.S. markets are looking north to Canada for a little relief and opportunity, particularly in office and industrial properties. First Industrial Realty Trust has paired with the California State Teachers’ Retirement System in a $285 million joint venture that will focus on acquiring industrial properties in Toronto, Calgary, and Edmonton, Canada. Last year, GE Real Estate, a unit of GE Commercial Finance, bought Toronto-based Dundee REIT’s portfolio of properties located in Ontario, Quebec, and Newfoundland for about CDN $2.4 billion. GE Capital also has purchased six office buildings in midtown Toronto, one of which it immediately sold upon closing.

Growing International Economies

Gross domestic product annual percentage change

Country 2007 2008E
Argentina 7.5 5.5
Brazil 4.4 4.0
Chile 5.9 5.0
China 11.5 10.0
Denmark 1.9 1.5
France 1.9 2.0
Germany 2.4 2.0
India 8.9 8.4
Mexico 2.9 3.0
United Arab Emirates 7.7 6.6
United Kingdom 3.1 2.3
United States 1.9 1.9
Vietnam 8.3 8.2

Source: International Monetary Fund