Our pick of headlines this week impacting commercial real estate in the emerging markets.
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Headlines:
Global
📰 Beijing is Spending $42 billion to Save its Slumping Real Estate Sector. Analysts Say It’s Nowhere Near Enough
The support package announced Friday features a 300 billion yuan ($42 billion) facility from the People’s Bank of China that will fund bank loans for the state companies charged with buying up completed-but-unsold housing stock. Economists expressed concern both about the limited size of the measure relative to the stock of unsold housing, and the risk it won’t be fully implemented.
Read More: Fortune
📰 The Global Tremors From China’s Real Estate Crisis Are Only Just Starting
Chinese investors are selling real estate assets globally to raise cash amidst a deepening property crisis at home, potentially revealing the true scale of the industry's troubles. This move comes as property values worldwide have already plummeted by more than $1 trillion. A benefit of the sales is they could provide much-needed transparency and price discovery in markets where few assets have been sold, leaving appraisers with little recent data. Completed commercial property deals hit a decade low in 2022. Notable sales by Chinese owners include a London office block sold for a 15% discount and a luxury development in Mayfair that collapsed into administration. These sales reflect a broader trend of Chinese developers pivoting from buying to selling, with assets in Australia and Europe also being offloaded.
Read More: Bloomberg
📰 With China’s Property Market Struggling, India, Korea and Vietnam Are Hot
Shawana Kwan of Bloomberg recently wrote about the trend of Asia's commercial property market shifting from China to India, Vietnam, and Korea. China's commercial property market is slumping due to a combination of companies pursuing a "China-plus-one" strategy to mitigate geopolitical risks and an oversupply of office space following pandemic-related construction delays. As demand plummets, the supply of new office spaces, particularly in tech hubs like Shenzhen, continues to rise, exacerbating the situation. Meanwhile, rents in major Chinese cities could fall by 6%, while Ho Chi Minh City rents rose 6.6% in Q1. India saw its second-highest lease signings, with Mumbai and Delhi rents up 5.6% and 3.6%. Qualcomm leased 500,000 sq ft in Chennai. Seoul’s rents are set to rise over 5%, with 98% occupancy.
Read More: Bloomberg
Latin America
📰 Milei’s Historic “Pacto de Mayo” to Revive Argentina’s Economy and Real Estate Market
In a historic move, Argentina's President Javier Milei is set to sign the "Pacto de Mayo" on May 25, a significant date in the country's history marking the First Junta's formation in 1810. This 10-point agreement aims to reform critical economic and social aspects, emphasizing fiscal balance and private property rights. Milei's first six months in office have seen remarkable success in combating hyperinflation, leading to a fiscal surplus and lower interest rates. His reforms have significantly impacted the real estate sector, with the market poised for growth due to improving economic conditions. IRSA Inversiones and Loma Negra are identified as key players well-positioned to benefit from this economic shift, potentially attracting more investors to the real estate sector.
Read More: Emerging Real Estate Digest (Author: Mihail Stoyanov)
📰 Mexico's Labor Woes and Lack of Investment Hamper Toyota's North American Production
Toyota halted production for 19 days in February and March at one of its Mexican production facilities. The letter to suppliers cited frequent production halts, high employee turnover, and declining skills at suppliers, compounded by global declines in electric vehicle demand and rising input costs. Labor challenges are not new in Mexico and have political and historic underpinnings. These challenges are exacerbated by inadequate investments in technical education, with Mexico spending less than 5% of its GDP on education, below the OECD average.
Read More: Emerging Real Estate Digest
📰 Purina Boosting Investment in Guanajuato Adding 94 Jobs to 600 Already Employed in Mexican Facility
Nestlé Purina invests $221M in Mexico, its top Latin American market, expanding its pet food plant in Silao to become the largest in the region. This move creates 94 jobs, adding to the current 600 employees, and is part of a $770M investment in the last decade. With Mexico producing over 200,000 tons of pet food annually, the expansion reflects the growing significance of emerging economies in Nestlé's strategy. The Mexican pet food market, expected to reach 2.5 million tons by 2025, is driven by high pet adoption and humanization of pets, with Purina holding 23.2% of the market and projecting $2.6B in revenue for 2024.
Read More: Emerging Real Estate Digest
📰 Lululemon Mexico Acquired By Vancouver-Based Parent
Lululemon Athletica is acquiring its franchisee, Lululemon Mexico, which operates 15 stores since entering Mexico in 2017. Despite alleged struggles in North America, Lululemon has maintained double-digit growth in Mexico. The brand's global revenue grew from $1.37 billion in 2013 to $10.1 billion in 2023. The company now has about 400 stores in North America, 40 in Europe, and 100 in Asia-Pacific.
Read More: Emerging Real Estate Digest
Africa
📰 Zambia Joins $150B Sukuk Market with Eden Villas' $3 Million Real Estate Issuance
Zambian developer Eden Villas Properties is set to issue the country's inaugural Sukuk, aiming to raise $3 million. Sukuk, or Islamic bonds, comply with Islamic law prohibiting interest. By 2023, the global Sukuk market reached approximately $150 billion, growing at a 10% CAGR. Despite fewer than 3% of Zambians being Muslim, this initiative targets Middle Eastern investors. UAE and Saudi Arabian investments in Africa exceeded $2 billion in 2023, highlighting regional interest in the Continent's economic potential.
Read More: Emerging Real Estate Digest
📰 Coworking Works in Africa According to AfricaWorks Founder
The global coworking market has nearly doubled to 40,000 spaces in 2024, experiencing an impressive annual growth rate of over 15% since 2019. Africa, however, represents a small share of this global market, with only 295 coworking spaces in 2022, accounting for 1.5% of the market. Notably, 80% of these spaces have emerged since 2018, indicating a rapid growth in the coworking industry on the continent. Projections for the future are promising, with the coworking market in Africa expected to reach $13.03 billion by 2025 and potentially $40.47 billion by 2030, demonstrating the significant growth potential of coworking spaces in the region.
AfricaWorks, a leading coworking space provider, operates in eight African cities and is set to launch in Johannesburg, further contributing to the growth and transformation of the African coworking landscape. Emerging Real Estate Digest interviewed the CEO and the findings are discussed below.
Read More: Emerging Real Estate Digest
Southeast Asia
📰 Luxury Home Sales Plunge 50% in Singapore So Far in 2024
Singapore's luxury home sales have plunged by 50% in the first quarter of 2024, significantly impacted by cooling measures, increased interest rates, and reduced foreign demand. Foreign buyers, particularly Chinese investors, have decreased by a staggering 99% from the previous year, contributing to this downturn. The implementation of the Additional Buyer's Stamp Duty has been a key factor in the decline, with Sentosa Cove, a high-end residential area, experiencing all-time-low home prices. Economic uncertainties, and stricter regulations and capital controls in China, have also limited the ability of Chinese nationals to invest in overseas properties.
Read More: Emerging Real Estate Digest
📰 With China’s Property Market Struggling, India, Korea and Vietnam Are Hot
Shawana Kwan of Bloomberg recently wrote about the trend of Asia's commercial property market shifting from China to India, Vietnam, and Korea. China's commercial property market is slumping due to a combination of companies pursuing a "China-plus-one" strategy to mitigate geopolitical risks and an oversupply of office space following pandemic-related construction delays. As demand plummets, the supply of new office spaces, particularly in tech hubs like Shenzhen, continues to rise, exacerbating the situation. Meanwhile, rents in major Chinese cities could fall by 6%, while Ho Chi Minh City rents rose 6.6% in Q1. India saw its second-highest lease signings, with Mumbai and Delhi rents up 5.6% and 3.6%. Qualcomm leased 500,000 sq ft in Chennai. Seoul’s rents are set to rise over 5%, with 98% occupancy.
Read More: Bloomberg
📰 Thailand Targets Chinese Steel Dumping Representing 70% of Domestic Consumption
Thailand's Ministry of Commerce is contemplating broadening current anti-dumping measures against Chinese hot-rolled coil steel, which makes up 70% of Thailand's steel consumption. In 2021, Thailand produced 4.77 million tons of steel, while consumption exceeded 17 million tons, highlighting the heavy import reliance that is strangling domestic steel producers. The US and EU have also acted against Chinese steel dumping, with the EU imposing duties from 22.1% to 86.5% on specific products to combat market undercutting and industry injury. The U.S. duties have risen as high as 266% depending on the type of steel product.
Read More: Southeast Asia Link
