Asian real estate still attractive after U.S. rate hike


By Samuel Shen and Clare Jim

SHANGHAI/HONG KONG, March 16 Asian real estate
remains attractive due to relatively high yields despite U.S.
monetary tightening as the pace of interest rate increases in
the region is expected to be slow, an executive at LaSalle
Investment Management said on Thursday.

Elysia Tse, LaSalle’s head of research & Strategy, Asia
Pacific, identified China as a market with huge business growth
potential, and brushed aside concerns over currency fluctuations
and Beijing’s capital control policies.

In the Asia Pacific “we’re going to see a slower pace of
interest rate increases, if any,” Tse told Reuters, hours after
the U.S. Federal Reserve raised short-term rates by 25 basis
points in a widely-expected move.

Japan is still fighting persistent deflation, while central
banks in some countries such as Australia may raise rates only
moderately, and the real estate yield is high enough to cushion
the impact, she said.

Tse’s comments might ease fears among some investors that
rising interest rates would boost borrowing costs and hit
property values. There are also concerns that higher rates in
the United States would lure capital away from emerging markets.

LaSalle Investment Management, owned by Jones Lang LaSalle
Inc, manages about $58 billion of assets globally,
including $7.8 billion in the Asia Pacific.

Regarding China’s property market, Tse downplayed currency
risks and regulatory uncertainty, saying LaSalle’s $330 million
China business has the potential to match that of Japan, where
the company has $5.34 billion of assets under management.

“China is the largest economy in Asia, and very important
part of our business. Given enough time, we will grow our
business (in China) as large as Japan,” Tse said.

Tse identified China’s logistics real estate as an area
representing “attractive” investment opportunities, citing the
country’s rapidly expanding e-commerce industry.

“You have a very strong demand, but you have a shortage of
modern warehouses…so a supply-demand imbalance in favour of
landlords and investors,” she said, adding that such properties
in China’s major cities yield 5.75-6.25 percent.

In China’s financial capital Shanghai, top grade office
buildings yield around 3.5-4 percent.

(Editing by Jacqueline Wong)