UK - Investors' overreliance on benchmarks is leading to poor returns, Robert Houston of St Bride's Managers has argued.
Speaking at the company's inaugural World City Seminar in London, Houston - now principal of St Bride's and formerly chief executive of ING Real Estate Investment Management - said investors should not use benchmarks to guide allocation.
He praised the work done by IPD on its indices, saying it was something the UK property industry should be very proud of.
However, he continued: "The people who use it - in my judgement - are abusing it. They become benchmark-determined. They are not allowed to see beyond the benchmark. My fear is that benchmarking will simply, ultimately, breed mediocrity."
He went on to cite the origin of these benchmarks, saying that, historically, they were used to guarantee construction at a time of post-war reconstruction, when there was population growth and a need for offices, retail and industrial properties.
"That's not the case anymore, and yet we still invest in offices, shops and industrial," he said, arguing that the only construction work of merit currently underway was replacing previous buildings.
He further argued that demographics should be monitored to see which areas required investment at present.
Ian Houston, partner at the firm, later referred to student accommodation as an area that had offered strong and growing returns in the past, but in light a decline in the birth rate, this growth would not continue.
Robert Houston further argued that the UK needed to regain its prime position in the real estate world, citing it as the country of origin for many of the methods now applied worldwide.
He lamented the decline in domestic ownership of real estate investment companies and asked: "Will that be a constraint on London and the UK being the throb of innovation in the global property market? I so hope not. But I am fearful we are becoming rather complacent."
He said further challenges for UK-based institutional investors was to embrace global real estate investment fully, with later discussions arguing pension funds should on average seek 35% of their real estate investment overseas.
Houston pointed to statistics that show large urban growth occurring in Africa and Asia over the next 20 years, with the former predicted to grow by 90% over the period as a reason investors should look further afield.