The Global Real Estate Market

For all the change in the global real estate market in the past two years, the landscape in emerging markets still looks much the same. In the second A.T. Kearney Real Estate Opportunity Index, China remains on top, Asia still dominates with six of the top 10 countries, and the Middle East continues to improve in the rankings.

The Index was designed to help property developers decide where to expand outside familiar markets. Focusing on a short list of emerging markets, the Index weighs real estate development potential against the risks (see figure).

The following are the major findings.

Strength in Asia. Continued economic growth and effective stimulus plans are fueling the Asian real estate engine. Top-ranked China and third-place India are expected to generate world-leading economic growth of 7 to 10 percent in the next several years, an outlook that should benefit their real estate markets. Although the Chinese market suffered during the final quarter of 2008, government steps kept the economy on track and real estate has improved throughout 2009. Growth in India's real estate market appears to be in the affordable housing sector, where there is demand for more than two million units in major urban areas.

In South Korea, which ranked second, government relief and infrastructure spending were supported by a strong economy that has reduced the impact of the crisis.

The Middle East's ascent. From Saudi Arabia's huge real estate market and "mega" projects to Abu Dhabi's continued emergence, the Middle East remains an attractive target for global investors.

In Saudi Arabia, prices are expected to rise, as demand for housing increases, business development projects expand, and a growing hospitality sector spurs $543 billion worth of projects under construction. Real estate is second only to oil as the country's largest economic sector.

Figure : The A.T. Kearney Real Estate Opportunity Index, 2010

In the United Arab Emirates, Abu Dhabi sparks the growth with a $200 billion real estate plan. Dubai, which was driving the development vision for the UAE, is now paying for overenthusiastic development with oversupply in most segments. Its experience is a cautionary model for other countries in the region. At the same time, its capacity to rebound quickly should not be underestimated.

Smart diversification. While real estate development is a local business, global success is not out of reach. The best route begins in a developer's home region and proceeds gradually.

There are two potential routes to take when expanding into an emerging real estate market.

The first is to expand gradually by geography, which requires gaining access to local knowledge and the discipline to avoid rushing indiscriminately into the hot market of the day. The other route is specialization, in which a firm takes the lead in a particular segment and carries that success across geographies.

From development to asset management. Top developers are diversifying into asset management. As major emerging markets mature, it offers stabilization and attractive revenue growth opportunities. Developers in Asia and the United States already rely heavily on funds, real estate investment trusts and property management as sources of revenue and growth.

For the complete study findings, see "Recovering Markets, Revised Ambitions" or contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .