By Scott Malone
NEW YORK (Reuters) - Looking to capitalize on the surging economies of India and China, executives at U.S. real estate companies are stepping up their focus on foreign markets, opening new offices and raising funds to invest in properties in the developing world.
They are not limiting their efforts to those two obvious engines of economic growth, but also looking for properties in Russia, Mexico and parts of South America, as well as recovering Japan.
"If you look around the world and you say ... 'Where's the white-collar growth going to be in the labor market?' It's certainly going to be in Asia and, interestingly, parts of South America," said Richard Kincaid, chief executive of Equity Office Property TrustEOP.N, said at the Reuters Real Estate Summit in New York.
While Equity Office, the largest publicly traded owner of office space, hasn't yet jumped into the international market, New York-based private equity firm Apollo Real Estate Advisors has started raising a $500 million fund to invest in Indian real estate, primarily office buildings and apartments.
"Like China, it's rapidly urbanizing and there's a rapidly growing middle class," said John Jacobsson, a managing partner in Apollo. However, he added that India seems a safer place to invest in real estate, since a clearer legal system and a longer established banking system make the going a little easier for Western firms.
"China has very little in the form of developed common law or contract law," Jacobsson added.
CHINA A 'NECESSARY INGREDIENT'
Still, China's rapid economic growth -- its gross domestic product grew at a 9.9 percent annual rate last year -- has prompted many Western companies to take on the market, regardless of the administrative challenges.
"Being in China is a necessary ingredient of our business plan," said Robert Speyer, senior managing director of Tishman-Speyer, a real estate developer and investor. "So many of our important clients here and in Europe are expanding there and want the same quality of real estate they'd have in New York or Frankfurt or London."
Speyer said his firm is in the process of launching a Chinese operation, which will be based in Shanghai and focus on residential and commercial properties. In January, it signed a joint venture with the private venture arm of India's ICICI Banking Corp. (ICBK.BO: Quote, Profile, Research, Stock Buzz) to invest more than $1 billion in India over the next three to five years.
Jones Lang LaSalle Inc. (JLL.N: Quote, Profile, Research, Stock Buzz), a real estate services company, has 16 offices in China, serving both Western companies looking to find low-cost sources of supply and for major retailers looking to sell to the growing middle class, primarily in major cities along the country's eastern shore.
"These economies are booming. There are lots of opportunities for good people," said Colin Dyer, president and chief executive of Jones Lang LaSalle, which manages three Asian property funds with about $3 billion in collective assets.
Beyond China and India, Jones Lang LaSalle sees expanding demand in Moscow, which Dyer said "has been the first stop for many multinationals headed for the Russian market" and Japan.
Demographic trends in Mexico has also attracted the attention of the real estate arm of diversified conglomerate General Electric Co. (GE.N: Quote, Profile, Research, Stock Buzz), which has a joint-venture retail investment there as well as an industrial portfolio.
"It is a growing middle class," said Michael Pralle, CEO of GE Real Estate. "There is a huge need for additional housing and additional retail."
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