The commercial property markets of Asia-Pacific are incredibly diverse. From the mayhem of Mumbai to the Swiss-like order of Singapore, the development frenzy of Shanghai to the resolute aspic of Tokyo, from the murky opaqueness of Jakarta to the reassuring transparency of Sydney.
I have nearly reached the end of my time in this fascinating region after nearly eight years of extensive travel. I arrived a month after Lehman Brothers collapsed and immediately experienced the twitchy calm before the expected storm in the region’s real estate markets. But the storm never really came.
In 2009, the Chinese government announced and executed a massive $600bn (£413bn) stimulus package which, combined with low interest rates everywhere, was like applying a giant defibrillator to the gasping economies of the region. The stimulus created demand all over Asia-Pacific and the real estate markets sprang joyfully back to life in 2010, led by a surge in capital values but closely followed by some real increase in tenant demand.
This occupier confidence fell away a bit after the Chinese government turned off the tap in 2013, but capital values continued to rise through 2014 and 2015 due to yield compression.
Devising strategies for growth in mature markets such as Japan, South Korea and Australia has, for me, been similar to my time in the UK and Europe. Refining our services and battling for market share is the order of the day.
In China, South-East Asia and India, however, it is very different and very exciting. These three geographies have a combined population of 2.6bn people, economic growth of more than 6% per annum, a lack of quality commercial property and no tradition of a property services industry. Planting seeds and nurturing growth in this rich soil can be hugely satisfying.
Since 2009, JLL’s workforce in the region has nearly doubled to 30,000 professionals working from 80 offices. Our revenues have more than doubled to over $1bn and our profits are eight times higher. Adapting our offer to Asian clients and recruiting and training local talent has been an amazing learning experience.
But these growth markets are not without their challenges. I used to take the wonderful liquidity of the UK markets for granted, assuming that access to market data and a tried-and-tested legal, planning and transaction framework was the norm. Often in these developing markets we are transacting assets for the first time with little data and no legal precedents.
This contrast is what, in part, will drive international capital flows. Western investors will want to enjoy the enhanced returns available from the combination of the systematic growth and market imperfections of Asia. Asian investors yearn for the relative certainty of wealth preservation and income from the well-trodden paths of more mature markets, such as the UK. Watch out: the flow of money from the East has only just started.
As I write, there is a two-speed China with big eastern cities enjoying growth in the service sector and the rest struggling with over-capacity and the slowdown in manufacturing; a buoyant India and South-East Asia; a healthy Australia, except for mining cities; and asset inflation fuelled by negative interest rates in Japan.
Cycles will come and go, but in the medium term it would take a brave man to bet against the dynamic markets of Asia-Pacific.
Alastair Hughes will step down as chief executive of JLL’s Asia-Pacific business on 1 July
