According to Colliers' biannual Asia Pacific Industrial MarketOverview, released Dec. 1, the growth of the industrial propertymarkets in most Asia Pacific cities has slowed compared to theprevious review period. The report, which covers 12 cities in eightcountries, says the economic downturn in major economies around theworld has affected demand for exports by Asia Pacific cities, whichin turn has reduced demand for industrial premises and slowed newconstructions.

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Acquisitions have also dwindled as the uncertainties in globalfinancial markets, tightening credit conditions and increasedfunding costs have dampened investor interest. According to NewYork City-based Real Capital Analytics, Asia-Pacific property salesplunged 68% in Q3, compared with 18% year over year throughAugust.

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On the other hand, say Colliers researchers, the same set offactors has made leasing more cost-effective than owning, lendingstrength to the rental market. Unfortunately, the shift is notlarge enough to keep vacancies from rising or rents from falling.According to the report, industrial rents in most markets havedropped since April.

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With the global economy likely to enter into a protracteddownturn, Colliers says the Asia Pacific industrial propertymarkets can be expected to cool further. While the firm believesMelbourne, Beijing, Shanghai, Delhi and Jakarta may to varyingextent see upsides in rents and land and capital values, those inSydney, Hong Kong, Singapore, Tokyo, Auckland and Wellington areforecast to remain flat or slide in the next 12 months.

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According to the ULI/PWC report, Emerging Trends in Real EstateAsia Pacific 2009, released Dec. 3, the industrial/distributionsector ranks second to offices for favored investment propertytypes. Shanghai gets the top buy rating, followed by Ho Chi MinhCity, Bangalore, Mumbai and Guangzhou.

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But as the report points out, the overall investment market isitself weak, making the industrial sector's high standing at best asilver lining in a heavily overcast sky. "Asia shares the sameliquidity crises that the balance of the world is facing," saysStephen Blank, ULI senior resident fellow for finance. "Financialinstitutions, whether international or national, regional or local,are reluctant to extend credit as deleveraging reduces balancesheet lending capacity."

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At the same time, the report notes the "moment of truth" has yetto arrive in most part of the Asia Pacific region. The exceptionsare China and Japan, where the credit squeeze began earlier. Butthe ULI and PWC researchers make it clear the crisis willultimately hit all areas, with the need to get takeout loans toreplace construction financing looming as the likely catalyst.

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