The Asian real estate market is beginning to strengthen across the board, according to Michael Thompson, Cushman & Wakefield president of Asia. “It’s a very good picture at this stage for all markets…due to intra-Asian trade and obviously the influence of the Asian consumer market."

Thompson says that while Japan is finally emerging from a 13-year recession, the real up-and-coming markets to consider are China and India, but both are still first generation real estate markets.

“If you look at India there is tremendous growth there," Thompson says. The markets of Delhi, Bangalore and Mumbai are the main focal point for investors looking to enter the country. According to a Cushman & Wakefield report, “The Indian real estate capital market has evolved noticeably in a short span of time. Though it is still considered to be in its infancy the growth fundamentals are strong. Significant demand across product verticals induced by continued economic growth, infrastructure changes and favorable government policies is already beginning to lead the market towards a higher degree of maturity."

Thompson says some investors are turning toward development in order to enter the market and remarks that it is a necessary move. “There is a tremendous accumulation of capital, almost on a weekly basis, seeking investment opportunities that really don’t exist. So what we’ve seen is that some of the more astute investors have become developers." Tishman Speyer Properties is one example Thompson cites. In April 2005, Tishman Speyer teamed with ICICI Venture Funds Management Co., an Indian private equity funds management company, to develop real estate in India, according to a release issued at that time. The new company is called TSI Venture Limited.

More companies, Thompson believes, will follow suit. “You are going to see many of the more conventional investor developers from both Europe and the US will have to take part if they want to create investment grade assets in India."

China is a different story. In the last 18 months, Thompson says, the Chinese government has put a number of controls on who can invest in the country’s real estate market. “That has slowed down the activity to a degree but there is still tremendous demand." Thompson sites Shanghai as the example; the city has less than a 5% office vacancy rate with little supply due to come online in the next three years. With the numerous governmental restrictions Thompson says China is an underrated investment destination. “Its investment fundamentals in the mid- to long-term are very sound."

Both markets can expect to see the opening of government channels to create a more defined institutional context, Thompson says. He expects to see real estate mutual funds, property trusts and real estate investment trusts (which neither country currently has) in the next three years. Korea, Japan and Singapore all have REITS that are quickly accumulating capital. “I suspect what you will see over the next three years is that the government in each of these emerging markets will bring in legislation to allow the creation of domestic real estate funds and that will have a fundamental impact on the economy and also the real estate sector."