HE IMPACT OF THE GLOBAL FINANCIAL CRISIS

HE IMPACT OF THE - THE IMPACT OF THE GLOBAL FINANCIAL CRISIS ON COMMERCIAL PROPERTY INVESTMENT IN ASIA GRAEME NEWELL University of Western Sydney

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Pacific Rim Property Research Journal, Vol 15, No 4, 2009 430 THE IMPACT OF THE GLOBAL FINANCIAL CRISIS ON COMMERCIAL PROPERTY INVESTMENT IN ASIA GRAEME NEWELL University of Western Sydney and MUHAMMAD NAJIB RAZALI University Technology Malaysia ABSTRACT Commercial property investment in Asia has taken on increased importance in recent years. However, the global financial crisis of 2007-2009 has had a major impact on global property markets, including the Asian property markets. This paper examines global commercial property transactions in 2007-2008 to assess the impact of the global financial crisis on commercial property investment in Asia. Major property investor profiles and property transaction locations are also assessed. Clear differences emerge regarding the relative impact in Asia, both in a global context and regional context. The results highlight the increased relative contribution by the Asian property markets across a range of property investment characteristics during the global financial crisis. Issues relating to the ongoing impact of the global financial crisis over 2009-2010 are also highlighted. Keywords: Global financial crisis, property investment, Asia, investor profiles, location analysis, relative impact. INTRODUCTION Commercial property is an important asset class for the major institutional investors (e.g., ING, RREEF), with over $19 trillion in investible commercial property available globally (EPRA, 2009). With international property investment having taken on increased importance in recent years, this has seen institutional investors, REITs, pension funds, private equity funds and sovereign wealth funds acquire significant commercial property portfolios in both the mature and emerging property markets, including Asia. Previous research has highlighted the benefits of including international property in a mixed-asset portfolio (e.g. Bond et al, 2003; Conover et al, 2002; Hoesli et al, 2004; Ling and Naranjo, 2002). International property diversification has also been shown to be more effective in the Asian property markets than in the traditional property markets (Bond et
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Pacific Rim Property Research Journal, Vol 15, No 4, 2009 431 al, 2003). This has been further enhanced by the increased property market maturity and the introduction of REITs in many Asian countries (Chin et al, 2006; JLL, 2008; Ooi et al, 2006). While 2007 was a record year for global commercial property transactions, with a transaction volume exceeding $1 trillion (Real Capital Analytics, 2008), the global financial crisis had a major impact on all financial markets in 2008, including the commercial property markets. This impact resulted from the reduced lending capacity of banks for the financing of commercial property. This was further compounded by the strong connection between the commercial property markets and the capital markets, which saw reduced funds committed to commercial property. This has seen major commercial property investors/lenders experience major financial difficulties; this
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HE IMPACT OF THE - THE IMPACT OF THE GLOBAL FINANCIAL CRISIS ON COMMERCIAL PROPERTY INVESTMENT IN ASIA GRAEME NEWELL University of Western Sydney

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