Western investors will likely focus on emerging markets in Southeast Asia, Asia Pacific and the Middle East, as developed economies fall behind on financial recovery, said Ethan Penner, executive managing director of CB Richard Ellis (CBRE) Investors and head of CBRE Capital Partners.
“Many investors believe that real estate as asset class offers diversification away from stocks and bonds and that in my opinion is a mistake. Commercial real estate is completely and perfectly correlated one-to-one to the broader economy. The macro economic climate and the health of the financial system are the two driving forces that dominate real estate value,” said Penner in his keynote address on the second day of the Cityscape Global 2010 held on October 4 to 7 at the Dubai International Exhibition Centre.
Penner added that only a growing market could yield sustainable demand for space and projected an average growth of 1 percent for developed economies, which is reminiscent of the Japanese economic growth over the past 20 years.
US investment guru Tom J. Barrack, Jr. shared the same views, claiming that smart money is now turning to emerging markets, which are outdoing the more mature European and US markets.
Chris Speller, group director for Cityscape Global, said real estate seems to have a bright future in emerging markets since they have healthy growing economies and are undeterred by unsustainable levels of debt.
While there is a danger that these markets may overheat again, Asian economies have learnt from past economic crises and governments are implementing regulations to prevent future real estate bubbles, said Penner.
Cityscape Global is among the biggest annual international business-to-business property investments and development conferences in the world, featuring an exhibition that brings together international and regional property-related companies.