GLOBAL - The BRIC countries will lead the global real estate market recovery as their economic expansion boosts occupier demand across all sectors and cross-border investment returns, according to Jones Lang LaSalle (JLL).
China, India, Brazil and, to a lesser degree, Russia will reinforce their position as the primary growing economic and real estate force in 2010, according to JLL's latest Global Markets Perspective report.
The combined economies of the so-called BRIC countries is projected to expand by 8% in 2010 and their domestic-led expansion is boosting real estate demand across all sectors and particularly in residential.
Even the Russian market, which has been severely impacted by the recession, "is beginning to bounce back in some areas", JLL said.
Domestic players have continued to dominate the BRIC investment and leasing markets over the past year, but the firm said a resurgence of foreign investor activity in 2010 was likely.
Renewed risk appetite among cross-border investors has brought about heightened interest in BRIC countries' first and second tier countries, with third and fourth tier cities still considered too risky.
China is expected to see a return of foreign investors in 2010 following months of strong domestic investor activity, which has kept liquidity high.
Rents are expected to rise in tier one cities in China due to strong corporate occupier demand, with Shanghai prime rents projected to rise by as much as 20%.
In India, investment sentiment is improving on the back of a buoyant economy, JLL said.
Developers have been highly nimble over the past year and have responded quickly to changing economic circumstances by creating new and different opportunities, such as converting a number of office and retail schemes into residential space.
A new wave of offshoring is expected to have a major impact on the Indian market, with a new generation of companies being forced to consider offshoring for the first time, the report said.
Brazil continues to be a focus for investors as one of the few countries outside the Asia-Pacific region exhibiting strong economic growth.
With a predicted 5% for 2010, both domestic and foreign investors are striving to acquire Brazilian properties or to invest in funds, according to JLL, although overall investment volumes are still low due to lack of existing assets for sale.
Russia, however, has been deeply affected by an 8% contraction in its economy in 2009, denting corporate occupier demand and shaking confidence from investors who expecting double-digit returns.
Prime office values fell by over 70% in Moscow between mid-2008 and mid-2009, but the market has stabilised remarkably quickly in 2010 as have GDP levels.
Economic growth is expected to recover to 3-4% in 2010, but markets will remain vulnerable, JLL said.