Attitudes to risk across the world

The view from Asia

Nicholas Brooke, former president of the Royal Institution of Chartered Surveyors and chairman of Professional Property Services, the Hong Kong-based consultancy

“The markets have remained very strong and that’s partly driven by increased allocations to real estate by many institutions and funds, and then in turn, greater allocations to the Asia Pacific region. So we’ve got an even greater weight of capital trying to find a home. Asia, of course, is a series of markets within a market and there are some stronger contenders than others. Japan continues to be the flavour of the month and China continues to attract a lot of attention despite some slowing in the economy. In terms of the more emerging property markets, Indonesia, the Philippines and Vietnam are all attracting attention.”

“People have short memories. They are now rationalising risk in a way that a year or two ago they would have said, ‘this is not for us – too risky’. They are definitely moving up the risk curve.”

“What’s interesting, I think, is the move into non-traditional areas of real estate. You’ve got the shift into second and third tier cities but you’ve also got the shift into logistics, student housing and retirement homes. Not that it’s their core business but developers are now spreading their horizons much wider in terms of the sectors and businesses that they look at.”

The view from the US

Mary Ludgin, managing director and head of global research at Heitman, the Chicago-based investment management firm

“In the US, conditions continue to improve along with the economy. Early-recovery sectors like apartments (rented residential) have shifted into a more-mature phase marked by a slower rate of net operating income growth. Office and industrial will see strong income growth as occupier demand accelerates while construction is at cyclical lows. In Europe, the economic recovery should begin to release pent-up space demand after a period of stagnation in demand and rents. And investment capital will begin migrating to riskier assets and markets. Asia is more variable. Tokyo office is poised for rent growth as the nation’s economy accelerates. Australia’s property markets have weakened but investment demand has not.”

The view from Europe

Dr Reinhard Kutscher Chairman of the management board of the German fund manager Union Investment Real Estate.

“Project acquisitions accounted for about half of our own investment volume of some €4.5 billion in the last two years. We expect development projects and redevelopments to play a greater role for investors going forward.”

“If investors from Asia and the Middle East were to significantly boost their positions in European real estate markets, competition will become even more intense. European investors will be under even more pressure to adopt alternative investment strategies.”

“The euro crisis is having a more sustained impact on investment decisions than expected. Investors remain cautious in terms of strategy and are taking precautions against defaults. At the moment, though, the only way to generate higher returns is to take.”

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PwC

Communications review


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