Diverse property portfolios to define global real estate

Mixed-use residential, office and retail portfolios are set to become the most profitable and visible option on the road to economic recovery, according to analysts from the UK and Indonesia.

A report this week from estate agents Knight Frank, built asset consultancy EC Harris and property planners Barton Willmore claims tall residential and mixed-use properties are emerging as the strongest investments, with a new wave of towers set to redefine London’s iconic skyline.

Elsewhere, analysts from PT Bahana Securities in Indonesia have projected that high yields seen on housing land since 2010 will benefit companies with diverse business models and a greater interest in commercial and high-rise projects in 2013.

The UK report, entitled ‘Tall Towers 2012: London’s High-rise Residential Developments’, takes into account unique planning, construction and funding issues associated with towers, finding clear benefits over costs for housing the capital’s swelling population.

25 schemes are currently under construction in the city, including a number of residential and mixed use properties, with a further 78 currently approved for planning permission.

On average, residential towers with penthouse capacity yield an additional price per square foot of 2.2%, whilst those without yield approximately 1.5% extra, with the greatest incremental increase in the cost of building among the 25 – 40 storey band.

Stephan Miles-Brown, head of Knight Frank Residential Development, commented: “This is London’s decade of towers: with residential land values up 20.3 per cent in the last twelve months and a population boom, a need for the most effective use of space is evident.

“However, only 30 per cent of the schemes including towers with planning permission are underway – partially a symptom of the challenging funding climate. The well-designed, centrally-located towers we will see succeed in the next few years will have a definite cachet – the clear premium for living at the top is a key driver in the development of a tower.”

In Indonesia, the rising investments that are supporting average industrial land sales prices (ASPs) have risen to their highest ever levels in 2012, and are likely to be followed by developments in the retail, office and commercial sectors.

Demand for retail properties is being driven by interest from global companies from Japan, Korea, Europe and the US, looking to capitalize on the countries’ growing middle class, who are focused in Greater Jakarta.

Analysts predict the rise in interest for residential and retail property is likely to drive further growth in the office sector, with serviced offices set to play a key role as property prices rise above inflation.

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