November 17, 2011
The wrap-up session for this year’s Mipim Asia found that the optimism expressed for the region over the show’s previous years had been largely justified by today’s real estate experience.
Professor Francois Ortalo-Magné from the Wisconsin School of business reported that of those surveyed at this year’s show, over half said that business was better in the last quarter than it was during the same period last year, with a third saying it was the same. And although there are concerns about the short term perspective as it relates to China, such as regarding global currency crises and tensions, China remains ‘in the driving seat’. This is in no small part because of changes in regulations. ‘Part of the confidence we hear is confidence in the Chinese government to engineer a soft landing’, said Ortalo-Magné.
Regulatory structures were indeed important. Yue Tang, attorney at law/partner at Jun He Law Offices said that China had adopted the most stringent policy on land supply in the world and central government had strengthened its control in secondary and tertiary cities away from local government.
Again in terms of research conducted during the show, 80 per cent of those surveyed said that China represented the best opportunities for real estate investment in Asia-Pacific, with just 10 per cent opting for Australia/NZ and 10 per cent from Japan. Beyond China, though, India was a ‘missed opportunity’ hampered by the regulatory structures, said Ortalo-Magné, while Indonesia was the country about which there were most mixed feelings – ‘a bi-polar response’ affected by concerns over stability.
Dr Megan Walters, head of research, Asia Pacific Capital Markets at Jones Lang LaSalle, said that economies in the Asia-Pacific region are ‘overheating’. The market space and for investors, however, are holding up well. There are strong Asian economic fundamentals an undersupply of investable stock and appreciating Asian currencies, negative real interest rates, but also risk and uncertainty. The upshot of the world picture, though, is that there is a continued demand for commercial real estate: ‘corporations still have money to invest, they have money to use’, said Walters. In Asia this includes western multinationals relocating, and Asian corporates expanding fast. Hong Kong is at the top of the performance curve – the ‘clock’ Jones Lang LaSalle creates to reflect comparisons of the real estate performance of cities across the world – with an undersupply of stock going forward. Hong Kong sits just ahead of Singapore and Shanghai, but rents in Hong Kong and Singapore may come off by 10% next year – ‘a little bit of relief is potentially a good thing’, said Walters.
China – why go elsewhere, asked Ortalo-Magné, revealing his own research into 2010 GDPs of countries, conducted last night with help from Google. South Korea is bigger than any province in China, but nine provinces have an economy bigger than Malaysia. And the scale is impressive; new big cities are appearing on this list all the time. ‘All these new Chinese names we have to learn every time we come here – it gets very complicated.’
The key question for the future of China, though, said Ortalo-Magné, is whether Government will up the pace of reforms toward freer markets to unleash innovation in SMEs – perhaps to bring ‘the next Apple’.
So, how has MIPIM Asia changed the outlook? Most of those surveyed were more optimistic about prospects going forward, with a tiny minority ticking the ‘less optimistic’ box. ‘There are always a few grumpy people – ignore those five per cent and buy them a beer’ – joked Ortalo-Magné . The future looks secure, especially given the level of ‘outstanding’, award-winning projects apparent at this year’s MIPIM Asia, such as the Marina Bay Financial Center at Singapore – the awards’ participants’ choice project. This year, for the first time there were also more submissions for awards in Asia than in the European version of MIPIM. That cautious optimism can continue…