Property sector set to gain from Asian funds boost-LaSalle

Wed Dec 5, 2012 9:26pm EST

* Asian investors to boost exposure to property

* Australian commercial real estate yields the most in Asia

* Hong Kong & Singapore property sector seen to start recovery

SYDNEY, Dec 6 (Reuters) - Asian commercial property prices will be supported by increased demand from the region's investment funds as they look to boost their exposure to the sector, real estate firm LaSalle Investment Management said.

The firm said Asian institutions are under-allocated compared with their European and North American peers which invest around 5 to 10 percent of their portfolios to real estate.

Paul Guest, LaSalle's head of research and strategy for Asia Pacific, said China's insurance funds have practically zero exposure to property, while pension and insurance funds in most of the region have between zero and 5 percent.

LaSalle, the real estate investment arm of global property consultancy Jones Lang LaSalle, said Australia currently offered the highest Asian returns in commercial property and the trend was likely to continue.

With a five-year forecast in total returns of about 10 percent per year, Australia topped Japan's 9 percent and South Korea's nearly 8 percent, it firm said.

"What investors find attractive about Australian real estate is the high and stable total returns on offer, low volatility, a solid and positive economic outlook with low unemployment and very high transparency in real estate markets," said Alexandra Gray, an associate director of research and strategy at LaSalle,

Still, LaSalle highlighted growing competition from the region as the property sector bounces back from a downturn.

Guest singled out Hong Kong and Singapore, which are currently near cyclical bottoms.

"As we move into next year or two years, as these markets start recovering... we'll start to see them be more competitive in terms of returns," he said.

LaSalle manages $47 billion worth of assets worldwide including A$2 billion ($2.1 billion) in Australia.

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