UK - Investors are targeting UK multi-let industrial assets in a search for inflation-adjusted returns despite little prospect of rental growth and significant regional risks.
A think-piece published this week by Henderson Global Investors argued that, even allowing for capital erosion, structural rebalancing of the UK economy would benefit especially smaller assets.
Take-up for these assets currently averages 35-40% of that in 2008.
The analysis, based on data published earlier this year by consultancy Gerald Eve, acknowledges variable appetite depending on investment style.
Henderson director of property research Andrew Schofield told IP Real Estate: "The value-add space is viable only where fund managers understand and price the probabilities of losing income.
"Core, long-leased stock will still be highly favoured, but it is very keenly priced for an environment in which market rental growth is likely to be absent for some time."
He said relatively higher returns on more prime, lower-yielding stock reflected the impact of falling yields on capital values as investors increasingly opted for perceived safety from mid-2011.
Geography is the strongest determinant of outperformance, with local business dominating the multi-let tenant base.
However, drivers vary significantly between regions that have performed well.
Industrial in London and the southeast relies on wholesale, communications and transport.
In contrast, Scotland's exposure to a strong local economy - and the existence in that country of tax breaks for vacant assets - contributed to it being the only region to register income growth in 2011.
"Income is the key to return and the key to income is understanding the tenant base - not only the sector they operate in but the type of business and where the exposures may lie," Eve said.
In the meantime, Schofield did not rule out macro-related deterioration of the market for industrial.
"Obviously, the economic backdrop is recessionary and will not be conducive to rental growth for some years," he said.
"A severe recession brought on by another economic shock would change our current understanding of the risk profile and investment market pricing overnight."