Posts Tagged ‘Colin Dyer’

Colin Dyer, Global CEO – JLL Speaks To Mint

April 11, 2011

(Mint, April 10, 2011)

Though the Indian government is trying to regulate the market, its unorganized nature challenges foreign as well as domestic investors and funds – Colin Dyer, Global CEO, Jones Lang LaSalle

What are your concerns about the India market?

India mostly remains a domestic market. Growth is mostly driven by domestic demand. Earlier, funds and investors were finding it difficult to buy assets. Though the Indian government is trying to regulate the market, its unorganized nature challenges foreign as well as domestic investors and funds. Problems with clear titles and legal hurdles also make the market opaque.

India saw a recovery in real estate in 2010. Is the recovery real? Since sales have gone down in the past two quarters, can we witness another correction in the real estate sector?

In India, recovery was heavily focused in Mumbai and Delhi in the residential and commercial space. Companies in the legal sector, consumer durables, banking and manufacturing sectors are acquiring commercial spaces in newly launched and to-be launched projects. There is a good demand for residential space, too.

The world at present is witnessing crises such as the tsunami in Japan, unstable political situation in Libya, Yemen and Syria. Will these events impact real estate prices globally?

The impact on the markets across the world is not significant. People are taking these events in their stride. But if the situation worsens, markets will be affected.

A lot of developers based out of London, east European countries and Australia have visited India in the recent past to market their properties. As shown, properties in these markets are at times cheaper than what is available in upmarket Mumbai or Delhi. Is this true? What are the few checks to run while investing in these markets? What kind of returns can one expect from these markets?

All these markets are liquid and can give good returns. In London, property prices are stable, therefore, it is a low-risk market. Overall, Europe is a growth market. East European countries are not so liquid but are cyclical in nature. Just like London, Australia is also transparent. It was depressed till the recent past, but it quickly revived.

Indian investors should be aware of the market price movement and returns. They should know the manager with whom they are dealing in these markets. Banks can provide assistance in these matters.

Why doesn’t India have real estate investment trusts (Reits) in place till date?

There is surely a market for Reits. But since the market is not regularized, it would take some time for Reits to be operational in the Indian market. Reits would make the market better. If Reits are in place, property prices and deals will have to be registered. But since states do not have uniform taxation laws across the country, there remains a problem of bringing best practices in the system. A developer becomes a true developer when they conform to Reits. But at present, most Indian developers hold their assets to get price appreciation and part-sell it to earn profits. Developer firms should change their business model before Reits come to India.


‘India back to business fairly soon’ – Interview with Colin Dyer, Global CEO and President, Jones Lang LaSalle Inc.

April 18, 2010

The global real estate recovery will be longer, slower and more muted in mature economies than it will be in India or China feels Mr Colin Dyer, Global CEO and President, Jones Lang LaSalle Inc. In an interview with Business Line, Mr Dyer discusses the structural changes in the real estate sector as a result of the recession and about the short-lived opportunity to buy at lucrative prices.

Excerpts from the interview:

Has the real estate market across the world undergone structural changes post the crisis? If so, what are they?

It varies from market to market. In India, for example, the structure has not changed.

There has been no permanent damage done either to the financing system to real estate or to any major players or developers. For certain there has been a tactical rather than a long term structural change.

Whereas in the US, for instance, the banking system relied upon securitisation of real estate to provide liquidity for the investment sales market. Well at least for the next year or two, the market for securitisation of commercial real estate is closed, so that means capital will not be available.

So that is again a structural change. We have seen some Real Estate Investment Trusts (REITs) of major real estate companies in Australia and the US simply disappear or be absorbed by others.

But in general for India, it’s back to business fairly soon.

The realty downturn was fairly synchronised across markets but the recovery does not appear to be so?

Well, the boom was synchronised, the downturn was synchronised in India and Europe/US and the recovery for sure was different by region. In general, you can say that countries which had strong growth rates before the recession came — Indonesia, Malaysia, India, China and Brazil — will be recovering quickly and coming back to fairly healthy growth in real estate activity as well.

When you look at the lower growth economies, the mature economies of Western Europe and the US, the recovery will be longer, slower and more muted than it will be in India or China.

Is the recovery backed by a fundamental demand for space or is it being viewed as an investment opportunity?

It depends on the sector and country. In India, the fundamental demand for residential space is for single family and multi-family homes; there is a pretty healthy demand for retail space as well. You can say the same of both sectors in China.

But there isn’t a fundamental demand yet for office space really anywhere in the world.

This is because reducing employee numbers and space per employee has resulted in no net take-up in office space. There does not seem much prospect for office space in 2010. I think in 2011 there could be some demand.

If you look at the investment sales market, the stock markets anticipated broad economic recovery for the last year and a half, so has real estate been anticipating a broad economic recovery. So there has been a recovery in asset prices which is well ahead of fundamentals.

India seems to be far way off from having REIT structures?

The fundamental factor for REITs to work effectively, for them to be liquid and for them to trade on the underlying value is that you need a liquid and transparent real estate market so that values can be continuously established and investors can understand the value of the real estate in the REIT.

The Indian real estate market is not sufficiently deep, liquid or transparent for REITs to be as effective as they have been in Australia, Britain France, Holland and the US.

Do you see a supply glut in Asian markets going by the current activity?

In China, for example, office markets do have 30-40 per cent vacancy rates in secondary cities. That’s a glut.

But China is doing 12 per cent a year and it is urbanising on top of that. So a 30 per cent vacancy rate, which would a disaster in Chicago and would take six years to clear, is probably a two-year problem in Chinese cities. So in Asian markets, even speculative development was a smart thing to do because there was such underlying growth. The rate of growth, if it is maintained at what we have seen over the last half-year — up in the high single or low double digit figures for China and India — will see these markets clear their gluts within two years.

You were quoted as saying a couple of months ago that there are quality assets available at prices that one can get once in a generation. Is this the case today?

The availability of quality assets at once-in-a-lifetime prices lasted about three weeks and very few people reaped the benefit. In retrospect what everyone expected would happen, broadly speaking, was that a lot of distressed assets would be dropped into a very thin real estate market. Why, because it was assumed that developers would be unable to finish projects- because people believed there would be a scenario of capital being unavailable for a long period and financial institutions would be forced to foreclose. But that did not happen.

In practice what has happened is that banks in most countries have been backstopped by their governments. So they have been given the liquidity or the ability to discount their loans with the central bank and the ability to delay the problem in the commercial real estate market, thus pushing the issue down the road. So there was no sudden rush of distressed assets in the markets. That was the first unexpected effect. The second unexpected effect is that although commercial asset prices dropped by up to 50 per cent, they have picked up under cover. In many markets, there has been a 20-30 per cent recovery. Which means as the banks delayed dealing with the problem; the assets have actually recovered some value — so the problems are becoming less severe.

So if you put these two things together the availability of distressed assets was short-lived and the assets began to recover. Any assets that were being sold were withdrawn from the market, because the sellers know that if they wait for six months they get a better price. So a lot of things have been surprises to people or things that were predicted happened much faster.

How do India and China score on the transparency factor in real estate?

Well the transparency measures drive the level of investor interest. Truth is that there has been very little inward institutional investment into either India or China. For India it was $2-4 billion and China’s peak was $7-8 billion of inward institutional investment. That’s about the size of investment sales in Paris in any one year. So they are very small markets. Transparency is about clear visibility on pricing and returns and means low levels of bureaucracy. It is also lack of corruption and a legal system which actually operates if you get into trouble. Exit routes or repatriation systems are also important. India and China depict very similar pictures on this front. They do not score high on the above factors.

Will withdrawal of restructuring packages to real estate and higher interest rates hurt real estate demand?

The restructuring packages into real estate directly, once withdrawn, may not have a big impact. The support packages for banks internationally will certainly have a big impact once withdrawn. And I think there are signs of those being removed, which will force banks to deal with their capital bases and deal with some of the bad loans given to real estate. That’s expected to be a trickle or flow rather than a tsunami. The interest rate issue is more subtle. We have seen in India a tightening of 25 basis points — that is not going to change anybody’s point of view on the economics of projects or purchase or pricing.

Much more impactful is what China is doing, which is changing the reserve ratios against lending. That drains immediately the level of liquidity available. It is not so much pricing that will have an impact, it is the availability. So we are seeing signs in China and I suspect India will follow of governments draining the availability of debt from the market because they are seeing inflation coming through wither in asset bubbles or in pricing of food and consumables. And that’s something that will affect the viability of finance for real estate and therefore the level of activity.

Do you see a possible debt crisis in other countries besides Greece, as a threat to real estate recovery?

It depends on how far the sovereign debt crisis goes. I think it is quite disturbing to see both England and America running deficits on their annual budgets and running levels of sovereign debt which are headed up towards a 100 per cent of GDP. That’s bad, but what’s worse is that there is no apparent urgency to deal with that situation. So what we have seen in Greece could potentially be a broader problem. I am not an economist but it is disturbing me that the issue of how to reduce debt is not being addressed by two pretty major economies and there are rather similar situations in Spain and Italy. In terms of what it could do to real estate – if you consider a situation where the risk-free bond rate which is traditionally the US Treasury Bond is no longer the lowest risk instrument in the world because if Warren Buffet can borrow for less than the US government, they you have got some fundamental realignments which are necessarily going to take place in the capital markets world wide. What its consequences will be, I don’t know but it would for sure mean that the rules for availability of capital in different sectors get adjusted and changed. It is something we need to pay attention to and watch out.

How far are we from the peak and how long would it take to get back there?

Real estate cycles have typically been eight years long from trough to peak. Maybe 10 years from peak to peak. So from where we are now, with the recovery just six months old, we may be six to eight years away from the next peak, assuming it follows the previous cycle. That’s a big assumption because what I just said about the recession is that things happened that people didn’t expect or did not happen or happened faster.

Residential demand has picked up: Jones Lang LaSalle‎

April 1, 2010

The Indian realty story is back on the growth path and has weathered the downturn. That’s the view of global real estate services firm Jones Lang LaSalle.

In an exclusive interview to NDTV Profit, Colin Dyer, President and CEO of the $2.5 billion NYSE listed firm feels that residential demand has picked up considerably and that fresh investments in the key driver of the Indian realty space.

“Growing upper middle class pushing residential spaces and in turn prices. Ulike last year, the US and EU have started taking some hard decisions and that is resulting in lot of IT spaces getting filled up or new IT properties coming up. Retail is another Indian industry that is seeing a lot of growth,” said Colin Dyer, President and CEO of Jones Lang LaSalle.

But India has long way to go when it comes to foreign direct investment in the realty space.

The reason is not just the strict banking regulations but also the lack of a transparent investment mechanism. Indian realty space witnessed an FDI inflow of about $10 billion in 2007-08 and is expected to remain in the same levels this year too.

“A lot of deregulation needs to happen. An investor needs to know not just how he can bring in the money but also how to take it out,” said Dyer.

Globally, Jones Lang LaSalle feels the US real estate market is still weak and signs of recovery are felt only in a few American cities. In some parts of Asia though the outlook is of a slow bubble building up. But in India the realty story is of growth across sectors.

Re-entry of US cos may revive Indian office-space market

March 28, 2010

Chennai: The demand-starved commercial office space market is slowly seeing positive signs, with several large and mid-sized US corporates firming up their plans to outsource their work to India for the first time. Major cities like Bangalore, Mumbai and Gurgaon have seen substantial business deals in the last few months and this has led to several new India-based subsidies and back offices which may generate substantial employment opportunities as well.

Experts tracking realty developments say that out of the new jobs being created, 80% will be in the IT sector alone, with the corporate sector accounting for the rest. Also, with new vistas being thrown open by US President Obama’s recent healthcare push—which may trigger an outsourcing spree in health and knowledge sectors—both job and office space markets may see major gains. Though the office space market has not been able to bring prevalent vacancies under control, there is scope for growth for realty, according to experts.

In an interaction with the media, Collin Dyer, president and CEO, Jones Lang LaSalle Inc, says India presents a huge opportunity in terms of attracting jobs outsourced by US firms. India has graduated from being a back office hub for Western companies to housing knowledge process outsourcing centres and research and development wings of multi-national firms. “Asia, which includes robust nations like India, has shown signs of an economic revival, and these are more evident that those seen in economies like the European Union, because of strong banking and financial systems present here”.

According to Jonse Lang’s India Office Map 2010 findings, the demand for office space is gradually improving with opportunistic tenants taking up space at lower rentals. The markets in Mumbai and Bangalore are leading the property cycle and are likely to recover the earliest among office-space markets. Also, the markets of NCR-Delhi, Chennai and Pune are expected to stabilise sooner that those of Hyderabad and Kolkata.

However, the real estate sector, which has been showing signs of a revival, could come under severe pressure if builders resort to a price hike to cash in on the emerging demand in the residential and commercial office space sectors, says Anuj Puri, chairman and India head, Jones Lang LaSalle Meghraj (JLLM). The builders in Delhi and Mumbai may have hiked the prices of residential apartments when sales were picking up, resulting in a slowdown in apartment sales.

Commercial space headed for pick-up

March 28, 2010

You know retail is doing well when noodles, cola and chips start selling well, says Mr Anuj Puri, Chairman and Country Head, Jones Lang LaSalle Meghraj, quoting a retailer he was speaking with to gauge the demand for commercial real-estate.

Mr Puri points to news reports of Indian and multinational companies starting recruitment after a lull in the last couple of years; outsourcing is picking up with more US companies looking to India. JLLM has enquiries on hand that indicate a good demand for commercial space — retail and office including IT and non-IT. Things certainly are looking up for 2010 which will see a pick-up, says Mr Puri confidently.

He was talking to a group of journalists along with a team of senior representatives from JLLM, including Mr Colin Dyer, President and Global CEO, Jones Lang LaSalle Inc, and Mr Ramesh Nair, Managing Director (Chennai and Hyderabad), Jones Lang LaSalle Meghraj.

Confidence in retail is increasing but the real action will be in office space offtake, they say. Office space offtake will be about 28-30 million sq.ft in 2010 compared with about 21 million in 2009.

A significant upswing even if it is yet to scale the peak of 2007 when it touched about 32 million sq.ft. The demand would be from telecom, healthcare, pharmaceutical sector and from consolidation of office space — that is companies upgrading to newer and modern buildings that are on offer.

Asia to fuel recovery

In line with the economic recovery trends, says Mr Dyer, the real-estate market will do better in Asia where the countries lead the economic recovery while Europe and the US are still recuperating from the hit over the last two years. Commercial real-estate continues to be short of funds as banks are loathe to lend. But some recovery is happening in major centres such as London, Paris and parts of Germany where investor interest is driving transactions as they foresee opportunities as recovery takes hold.

In the US, the ‘markets are still hit’ and lending is hard to come by in real-estate, he says. Equity investors are not yet convinced that the worst is behind or that the market has seen the bottom. But companies that have managed to consolidate over the last two years are better off in terms of liquidity and are now beginning to make investment decisions. They are particularly keen on investments that will support cost reduction, which means outsourcing to the Philippines and India, according to Mr Dyer. “The first phase in investing is in cost cutting,” he says.

Bangalore in spotlight

According to Mr Puri, US companies in healthcare, insurance and IT will drive demand for space. Another significant feature will be that this will be relatively high-end jobs and quality space with R&D and knowledge process outsourcing (KPO) in addition to the run-of-the-mill call centre and software space. Nearly 80 per cent of the expected demand in office space for 2010 would be from US companies with three-fourths from IT and related areas and the rest from other corporate segments. Bangalore would be a major beneficiary among the metros, he says. JLLM, a leading international property real-estate consultant, has the enquiries and orders on hand for space that show 2010 could see a change for the better.

Mr Nair says office space absorption in 2008 was about 2.6 million sq.ft in Chennai against 4.1 million sq.ft in 2008 and 7.2 million sq.ft in 2007. Nearly 10 million sq.ft of office space is lying vacant, of which, IT space is about 7 million, SEZ space about 2 million sq.ft and others non-IT. But in 2010, in the first three months alone, there is demand for about a million sq.ft of office space with JLLM which is an ‘extremely good sign’ he says.

Mr Puri points out that office and retail space were worse hit than residential space and are recovering. For instance, initial estimates of office space supply were about 200 million sq.ft between 2009 and 2011 with about 70 million sq.ft each year. But following the slump in demand, developers are slowing down supply and delivered only about 19 million sq.ft in 2009. Much of the commercial space was converted into residential projects.


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