Real Estate Expert Says 'Go East'

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(DUBAI, UAE) -- Debt problems in mature markets will stifle economic growth and therefore real estate values, pointing investors towards emerging markets in the Middle East, Southeast Asia, and Asia Pacific, according to real estate expert Ethan Penner, who delivered the keynote at Cityscape Global today.

Penner who is President, CBRE Capital Partners, and Executive Managing Director, CBRE Investors, opened day two of the Cityscape Global Real Estate Investment and Development conference, spoke about what he called a new paradigm for global finance, banks, capital markets, and regulators.

"Many investors believe that real estate as asset class offers diversification away from stocks and bonds and that in my opinion is a mistake. Commercial real estate is completely and perfectly correlated one-to-one to the broader economy. The macro economic climate and the health of the financial system are the two driving forces that dominate real estate value," explained Penner.

Penner went on to say that only a growing economy could generate sustainable demand for space. To get ahead of the herd, an investor should understand and anticipate macro-economic change. "Real estate, more than any other asset class is dependent on debt. It would be unheard of for a corporation to have 60-80 percent of its capital structure in debt, even 40 percent debt would be considered high risk. In real estate, however, this is commonplace; the average is 70 percent, and frequently it can exceed 80 percent or even 90 percent, so when the debt capital markets catch a cold, real estate is invariably in trouble."

Penner's forecast for growth in the developed economies is sobering, "The best case scenario would be average growth of up to one percent, reminiscent of the way the Japanese economy has performed over the last twenty years," he said.

The Cityscape Global 2010 conference at the Dubai World Trade Centre has attracted leaders of the international and regional real estate industry such as Tim Fox, Chief Economist, Emirates NBD; Gurgit Singh, COO of Sorouh; and Phillipe Baretaud, Development Director Middle East at Accor Hospitality.

This year 180 exhibitors and participants from more than 100 countries and 30,000 visitors are making contact during the four-day show that ends Thursday. It was opened yesterday by Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai.
 

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