Dunbar Property Group presents its latest snapshot of views expressed on the current commercial real estate markets it is monitoring. We trust you will find value in the synopsis.
UNITED KINGDOMWe have been forecasting for some time now that the UK real estate market will be the first mature market to recover and V shaped at that. Many global investors concur with this view and some are calling the bottom of the market. Significant capital is already flowing into the UK market with big name brands seizing the opportunity for early entry. With some 20% to 40% declines in the last year and a half, this seems to make good business sense as property is a long term asset class; the decline has slowed remarkably in the last few months as financiers, private equity groups and investors start frenetic activity. Deals in the residential market are also churning as finance becomes more readily available and surprisingly it is the London Luxury Market leading the way. This is indicative of institutional acquisitions for corporate executives.
For those investors who wish to seize the moment, we are listing UK real estate investment opportunities with a focus on London and strong covenants on long leases. We also believe the turn in the residential market will be significant and have listed an opportunity to invest in a central London residential fund.
See “OUR OFFERINGS” below.
UNITED STATESWe believe the US market has some way to go with a high degree of uncertainty still prevalent, however, there are some areas portraying resistance, improvement and recovery. Deal making is taking place at an increased pace in these areas at significantly higher yields, factoring in future vacancy expectations.
Retail and office demand for space continues to decline leading to expanding vacancy factors as hefty job losses continue to weigh on the market. Leisure leads the distressed wagon followed by Retail, Industrial and Office in a close bunch with property for sale far exceeding demand. A bottom is anticipated in 2009 followed by volatility in 2010 characterised by further value declines (already exceeding 40%) and repossessions. So whilst there are opportunities, particularly in major metropolitan areas, caution is advised.
AUSTRALIAQuick government intervention saw Australia avert a technical recession which boosted confidence considerably. A vast majority on Investors in Australian CRE believe the market is in stagnation heading for upswing in 2010. Other reports suggest the market is set for a further correction in 2010. Institutional investors appear very much on the sidelines as local private investors and syndicators take up the bulk of declining transactions followed by a number of bullish offshore investors. The Australian market is not clear cut one way or the other but there is optimistic activity and may warrant well researched scrutiny.
SOUTH AFRICAWhilst South Africa was largely unscathed by the global credit crunch a combination of factors is having a negative impact on the market. For one, the financiers went into hibernation peeking out every now and then with excessive margins and fees, negating the entire effect of recent interest rate cuts by the central bank. A number of private funds were caught in the high interest rate cycle and due to the lag effect, some of these funds are now falling into liquidation.
On the whole, though, the CRE market is fundamentally sound albeit with tenant delinquency on the increase. The institutional investors are still the dominant players with big purse strings and low gearing, which bodes well for upper end commercial property. Private investors are also coming to grips with the market, becoming street wise and bolstering up in JV’s, resulting in increased demand. Yields are still trading in a narrow band width between 10.5% and 11.5% for the most part with some stressed sales in excess of 12%. Good quality has potential to get 10% but as yet, we have not encountered the sub-10%’s seen some 18 months ago.
OUR OFFERINGS (Select Preference)
Central London Residential Fund
UK CRE Investments
SA Private Equity
SA Commercial
SA Industrial
SA Retail
SA Leisure
SA Development Land
Your comments and observations are always welcome.
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