REAL ESTATE - Global real estate fundamentals will remain healthy in most markets over the next 12 to 24 months, ING Real Estate predicted.
"They will be supported by moderating but above-trend economic growth, improved earnings, and the continued inflow of capital," it said in its annual global research report Global Vision.
"However, there will be significant variations in performance by sector and by region. The global movement of capital is changing the nature of investment opportunities," Timothy Bellman, global head of research, added.
ING notes that the flow of capital into real estate has continued unabated, and that cross-border investment will continue to play a major role in underpinning current pricing.
"We are seeing an increase in both property investment trusts and commercial mortgage-backed securities, as real estate continues to outperform equity and bond markets in most major markets."
ING’s report forecasts significant improvements in continental Europe’s property investment climate. "Due to increased transparency, liquidity and strong performance, real estate has emerged as a widely accepted asset class," Maarten van der Spek, managing director of European research and strategy Continental Europe, commented.
According to ING, trends and yields are likely to deliver attractive risk-adjusted total returns during the next three years, "suggesting an overweight to the region for core investors".
While Global Vision predicts increasing capital flows into Europe, yields are expected to continue to re-rate in the medium term, it said. "Global investors will be swift to take advantage of the yield arbitrage opportunities that continental Europe presents relative to other regions in the world."
For the UK, ING forecasts moderating performance in the industrial and retail segments, while the outlook for the office and residential markets is more positive.
In Asia Pacific, the prospect of further major yield compression is limited in most markets, ING stated. "Due to compressed yields and higher borrowing costs, leverage no longer enhances returns as much as it did in recent years in many markets," Bellman pointed out.
"Throughout the whole region, property fundamentals are still generally strong, offering sound growth prospects."
The US office sector is poised to perform well in the short-term, with demand far outstripping supply, ING noted. "Manhattan rents have risen by over 30% year-over-year, and there is no shortage of demand for prime space," Indraneel Karlekar, head of research for ING Clarion Real Estate Securities, said.
The report concludes that performance in the retail and industrial sectors is likely to stabilise, as consumer spending eases, while the apartment sector will continue to be challenge by high costs, increased vacancy rates and limited demand.
Meanwhile, Fortis Property Investments announced the acquisition of the retail centre Entre-Deux in Maastricht for an undisclosed sum. It comprises of 13,500 m2 retail space, as well as 20 apartments and 200 parking places which are not included in the transaction.
Fortis bought the centre using Maastricht BV, a joint venture of 3W and AM NV, the former Amstelland.