Istanbul ~ Property Returns

Moscow, Istanbul Property Returns May Surpass London

Moscow and Istanbul real estate investment returns may surpass Paris and London as emerging-market economies grow at a faster pace than western Europe, according to a survey of investors, brokers and analysts.

London dropped to 15th place out of 27 cities for 2008, from second last year, according to the report by the Urban Land Institute and PricewaterhouseCoopers. It's the first time the annual survey hasn't ranked London among the top 10 European cities in terms of investment and development prospects. Paris dropped to fifth position from first.

``There is an increasing appetite for emerging markets,'' John Forbes, the London-based head of real estate at PricewaterhouseCoopers LLP, said in an interview. ``Russia and Turkey are regarded in the same way as the India of Europe. They are top for economic growth.''

U.K. commercial real estate prices fell in 2007 by the most in 17 years, according to London-based research firm Investment Property Databank Ltd. Property appraisers are lowering valuations as demand for space from banks and securities firms declines amid credit-market losses and writedowns caused by the collapse of the subprime mortgage market.

Moscow ranked as the city with the best prospects. The Russian economy is growing at more than 7 percent a year, boosted by its position as the world's largest energy exporter. That's created a shortage of warehouses and prompted developers to build more properties in the country.

Respondents to the survey also said Moscow was the riskiest city to invest in.

Moscow Corruption Risk - ``The risk versus the return in markets like Moscow are high,'' said Adam Caskey, a managing director at LaSalle Investment Management in New York who helps manage about $50 billion of assets worldwide. ``The political risk, the corruption risk and what we've seen from target returns -- they don't add up at this point.''

Istanbul is benefiting from rising consumer demand fueled by Turkey's 5 percent economic growth over the past two years.

The country's rapid growth ``will definitely boost demand for commercial assets,'' said Levent Bayar, a research analyst at HSBC Holdings Plc in Istanbul. ``Even Turkish companies, which are not very rich compared to their Western counterparts, are demanding Class-A offices now.''

German Cities Rise - Frankfurt, which ranked at the bottom of the survey last year, and Berlin, which was third from last, joined Munich and Hamburg in the top 10 as vacancies fall and rents rise, according to the Emerging Trends in Real Estate Europe 2008 report.

``By every underlying economic fundamental, Germany is a top market and there is a desire to be there,'' said William Kistler, president of ULI in Europe, in an interview. ``People are really making up for lost time.''

Dublin came last in the survey. Ireland's central bank last month cut its forecast for 2008 economic growth for the second time in four months, to 3 percent, citing a slump in homebuilding.

The following table shows the rankings of the top 10 cities in the survey:

Moscow, Istanbul Property Returns May Surpass London - Article taken from Bloomberg

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