Magazine article Journal of Property Management

Emerging Trends in the Asia-Taiwan Market: More U.S. Investors Look to Markets outside Their Borders

Magazine article Journal of Property Management

Emerging Trends in the Asia-Taiwan Market: More U.S. Investors Look to Markets outside Their Borders

Article excerpt

The demand for global standards in the management of real estate assets appears to be growing. Investors worldwide are placing greater value and faith in the capabilities of management teams to run their properties as profitable revenue-producing businesses.

* Emergence of a New Business Model

Speaking in June to more than 300 real estate practitioners from around the world during the FIABCI Congress in Taichung, Taiwan, IREM President Elizabeth (Beth) Machen, CPM, drove home this point as she discussed the shift in the real estate investment business model and the impact it is having on the management of investment real estate.

"The investment model of the past assumed that capital was readily available and virtually unlimited and that holding periods would be short--assumptions that translated into maximum use of leverage and high appreciation expectations."

"That worked well--up to a point," she said. "But as we all know, this is no longer the case."

Capital is not so readily available, holding periods have lengthened and the perceived risk of owning real estate has grown. The result, according to Machen, is the emergence of a new business model that focuses on a return to fundamentals and operational excellence delivered by a professional real estate manager.

* Asia/Taiwan Real Estate Market Slow to Recover

Moderating the panel on which Machen appeared was Joseph Lin, Managing Director of CBRE Taiwan, who agreed with Machen's premise while also providing insights into the Asian real estate market generally and the Taiwan real estate market specifically.

While evidence clearly suggests the economy in most parts of the world is improving, conversations among real estate practitioners in Taichung made it clear that there has not yet been a full rebound. Downward pressure on rents continues and higher than normal vacancy rates linger in many markets. Consider Taiwan: With a population of just fewer than 24 million, it has one of the world's highest home ownership rates at 87 percent. Recently, a loose monetary policy, low interest rates and changes in tax laws have resulted in a housing market where 20 percent of the units are vacant.

Emphasizing the importance of management in the investment process, Machen pointed out that real estate value is created at one or all of the three stages in the investment's life cycle: when it is acquired, during the holding period and when the property is sold.

"Prior to 2008, it appeared that most or even all of the value creation revolved around transactions--when a property was purchased and when it was sold," she said. "But suddenly that changed. Transaction activity in all markets slowed down considerably--and in some markets ground to a halt."

As a result, said Machen, "the opportunity for enhanced value today focuses on what can be done throughout the holding period--and this plays right into the skills and talents of professional real estate managers. Those who are not passive caretakers and mere rent-collectors but are active participants in contributing to asset value through operational excellence"

* Property Management in Taiwan in its Infancy, but Catching On

When asked if the real estate management profession in Taiwan parallels the U.S. experience, CBRE's Lin noted that property management in the past was performed primarily by security guards, typically retired soldiers, who wanted to earn some petty cash. …

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