UNITED STATES – Institutional capital will head into new countries within the Asia Pacific region such as Vietnam and Brazil over the next two years, according to research presented by RREEF
Details of RREEF’s Asia Pacific Property Cycle Monitor, capital moving into the areas will be small to begin with but funds are expected to be placed in the type of properties seen in the US, such as office industrial, retail and residential.
"These countries will not see a big influx of capital right away," said Peter Hobbs, global head of research at RREEF.
"One reason for this is that Vietnam and Brazil are small countries and financially can’t support a huge influx of new capital so it will be on a smaller scale," he added.
RREEF’s report indicates the amount of capital invested in the Asia Pacific region is still on the rise. Having grown to $50bn (€36.6bn) in 2005 and $65bn in 2006, the amount is expected to be even higher for 2007.
The big four markets in the Asia Pacific region - Japan, Korea, China and India – will continue to get the lion’s share of the capital and the type of real estate being invested in is very similar to other developed countries around the world.
At the same time, however, investors are, in many cases, adding to the real estate, said Hobbs.
"In some parts of the Asia Pacific region, like China and India, the capital being invested is for the development of new properties. In these countries there is just a limited amount of institutional-quality properties available. There also is a demand for tenants for these new properties," he added.
Hobbs suggested there are three main sources of capital in the region but any investor will have difficulty finding companies to partner with.
"The first group of investors is the opportunity funds that have raised capital from a lot of institutional investors, followed by other institutional investors based in countries like Germany and Australia, while the final group is a mixture of local investors," said Hobbs.
"It’s very difficult to judge who the good local partners are. It took RREEF two years before it found the right operating partners for us to work with in Russia. There is a long educational process that needs to happen [here]," he added.