EUROPE – The European economy is facing a lost decade, but the region's real estate markets still offer investment opportunities, delegates heard at Invesco Real Estate's conference in Amsterdam last week.
Marie Diron, head of European macro services at Oxford Economics, told an audience of Dutch pension funds and investors that public sector deleveraging and austerity measures could stunt European growth for a decade.
"This is not a short-term crisis" that can be resolved by 2014, Diron said, pointing to a combination of public and private sector deleveraging that would last for several years.
Although the threat of a euro-zone break-up looked less imminent following recent measures by the European Central Bank, Diron said a multiple-country exit was more likely (25%) than Greece leaving on its own (5%), and the economic cost would be "enormous".
Despite the pessimistic outlook, Kim Politzer, research director for Europe at Invesco Real Estate, argued there was "still a story to support real estate investment" in the region.
She said "key gateway centres" in Europe would grow faster than national economies and provide medium-term investment opportunities in the retail and hotel sectors.
Offices were also expected to deliver the best short-term returns in supply-constrained city centres, while logistics could provide attractive income returns, as it benefitted from the growth in internet retailing.
Investors were also told they should consider diversifying globally and favouring tactically the Americas if they were seeking a low-risk profile, while also targeting Asia-Pacific growth cities.
James Cowen, portfolio manager at Invesco Real Estate Securities, explained how investors could use listed markets to capitalise on emerging global investment themes: ageing demographics, urbanisation, rapid technological advancement and shifts in the distribution of global wealth.
He said the listed property market could provide access to these global trends by investing in companies that specialise in sectors such as healthcare, apartments, data centres and shopping centres.