2010 Global Market Report - NAI Commercial Real Estate

The exchange rate has hovered at 13.5 pesos to the US dollar throughout 2009. Interestrates remain stable after having dropped in mid-2008 to their lowest levels (7.3%). Thedemand for maquiladora product dropped significantly, but by year-end 2009, interesthas surged due to increasing labor and transport costs from Asian operations.While real estate activity declined significantly, Mexico City fared better than most markets.The office and the industrial sectors generally experienced positive absorption, thoughabout 20% lower than the previous year. Demand is expected to increase slightly during2010. Lease rates in Mexico City are relatively stable, but softened by about 15% in thesecondary and tertiary submarkets. Sale prices across the country are also stable withcap rates about 9.5% for quality product, and IRRs in the 15-20% range.Venezuela2009 was a difficult year for Venezuela as the global recession, plunging oil pricesand poor economic micro-management policies plagued the country. The next fewyears will be particularly difficult with shortages expected in many sectors includingpower and water. Except for activity from political bedfellows such as Iran, China,Libya and Russia, there is virtually no new foreign investment in Venezuela outside ofthe petroleum industry. That said, the petroleum industry remains a powerful andprofitable economic engine.The country’s administration and policy environment hampers recovery. Vacancy ratesare still near zero in office, industrial and retail properties and rental rates are rising dueto high inflation rates. Investors and developers remain very cautious due to the lackof transparency and political risks.Asia PacificThe general feeling across most of Asia is that the worst of the recession is over.Most Asian countries have experienced a major rebound of stock markets, as wellas some improvement of real estate values, especially on the residential side. Themain indices in Hong Kong, mainland China, South Korea and Singapore have risenmore than 50% since January 1, 2009. The Indian Sensex has climbed 72% andstands 20% above where it was just before Lehman’s demise. However, thereremains an underlying cautiousness.Countries like Singapore, Hong Kong and South Korea that have seen quickturnarounds in their residential property market values since the beginning of 2009 alsosee their governments testing new regulations to manage another bubble. Hong Konghas seen more than a 25% rise in its mid-priced residential sector, and a 40% rise in theluxury sector since the beginning of the year. Recently, a Hong Kong apartmentwas sold for a record price of HK$71,280 per square foot (US$9,197 per square foot),setting a world record price per square foot. In response, the Hong Kong governmenthas cut mortgage limits and freed up more government land for residential development.Nonetheless, wealthy mainland Chinese buyers continue buying luxury residentialproperties all cash, and often on all-expense-paid property viewing tours by Hong Kongdevelopers.2010 Global Market Report ■ www.naiglobal.com15