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Real estate: A lifeboat for choppy markets

Asian investors still love property, despite the tight spreads.

Enough spread? Lease risk in selected Asian office markets
City Stabilized yield Debt Spread (bp)
Tokyo 5-5.5% 2.25% 275-325
Seoul 8.5-9% 7% 150-200
Hong Kong 6-6.25% 4.75% 125-150
Singapore 6-6.5% 4.50% 150-200
Bangkok 9-9.5% 7.50% 150-200
Shanghai 9-10%+ 7.50% 150-250+
Beijing 10.5-11.5%+ 7.50% 300-400+
Guangzhou 10.5-11.5%+ 7.50% 300-400+
Source: Jones Lang LaSalle/LaSalle Investment Management

Like many asset classes, Asia’s property markets have enjoyed strong growth over the past few years, compressing yields and spreads over cost of funds (see table). Yet there is little sign that the region’s real estate markets are preparing to pause for breath as demand from investors continues.

"We remain very positive about the prospects for the region," says David Edwards, regional director at LaSalle Investment Management in Hong Kong. "Economic growth is very strong, companies are growing rapidly and sentiment is very strong."

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