Trends in real estate private equity

Emerging markets in focus

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Real estate activity in the emerging markets of Brazil, Russia, India and China (BRIC) has for the most part withstood challenges in the global economy, although they have experienced some effects. Take a closer look at each market below.

The weak global economy has started to affect Brazil. Its economy grew only 0.75% in 1Q12. Yet inflation and unemployment are both falling.

Brazil

  • The weak global economy has started to affect Brazil. Its economy grew only 0.75% in 1Q12. Yet inflation and unemployment are both falling.
  • Sales of trophy assets drove average prices for retail and office properties to multiyear highs.
  • Transaction activity has picked up in Brazil’s secondary markets, where development is meeting the needs of a growing consumer class in previously underserved markets.

Source: Real Capital Analytics, Prudential Real Estate Investors

Russia

  • Russia has withstood the challenging global economic conditions. The International Monetary Fund has forecast GDP growth of 4% for both 2012 and 2013.
  • The country’s relative economic stability and lack of investment-grade properties should support asset prices.
  • Observers note that investors may favor Russia in the near term because pricing has been stable there and the market appears to have the ability to recover quickly once systemic risks abate.

Source: Real Capital Analytics, FTI Consulting

India

  • Massive urbanization, strong local demand and a thriving economy have all been driving a strong commercial real estate sector in India over the past several years.
  • Banks are lowering their exposure to real estate so developers must obtain financing from non-banking sources.
  • India has favorable demographics for real estate investment that are attracting foreign investors: a large labor force, a young population and a growing middle class with greater amounts of spending power.

Source: Real Capital Analytics, DTZ

China

  • Economic growth decelerated in China over the past several months. Even so, analysts forecast a growth rate just below 8% for 2012, much higher than any of the developed economies.
  • Investment activity in the Asia-Pacific region has recently fallen as the global economy tries to right itself and economic uncertainty subsides.
  • The retail and office sectors are the best-performing property sectors.
  • Increased urbanization and higher household incomes have led to a rapidly growing consumer class. This trend is expected to continue and should boost values of investment-grade shopping centers.

Source: Real Capital Analytics, DTZ