Investors see real estate outperform equities – DTZ report

Investors have become much more upbeat in their expectations for the performance of commercial real estate versus equities, property adviser DTZ’s latest Money into Property report reveals.

A net 7% of investors polled by the firm expect direct real estate to outperform stocks compared with a negative 25% last year. ‘This is a very big move in our results,’ Hans Vrensen, head of global research at DTZ, commented during the launch of the report on Thursday.

Investors’ rating of real estate versus bonds stayed roughly unchanged with a net 68% expecting property to outperform compared with 72% last year.

In terms of sourcing real estate, an increasing majority (91%) of investors now say the conditions for accessing non-prime assets are ‘normal’ or ‘easy’ compared with 75% in last year's survey. ‘An overwhelming majority now think non-prime is neither hard nor easy to source, meaning that most now see the opportunity in this segment as normal again. This is good news for the market overall,’ Vrensen said.

For the first time in the survey’s 40-year history, Asia Pacific moved ahead of Europe in terms of invested stock with $4.6 tln compared to $4.4 tln (€3.3 tln) for Europe. The subdued growth in Europe (2%) reflected continued deleveraging and loans sales by banks although the picture across the continent was mixed. Germany, France and the Nordics posted the strongest growth at between 4-5% while the UK recorded a 6% decline mostly driven by continued bank loan sales. Invested stock in the PIIGs countries continued its downward trend with a 9% decline for the second consecutive year, reflecting price adjustment and deleveraging.

DTZ’s latest survey also found that Europe has the most diverse picture globally in terms of equity ownership of property. Over half Europe's real estate stock is owned by listed companies and institutions with developers taking around 33% and funds accounting for the rest. This compares with close to 50% ownership by developers and private companies globally. ‘In general, diversity of ownership is important. The more diversfied the ownership base, the more the market is likely to be resilient to price movements,’ Magali Marton, head of CEMEA research at DTZ, said during a webcast on the report last week.

Private equity was the only source of capital to see growth in Europe last year, increasing 4% to €1.3 tln as private companies and investors as well as insurance companies increased their equity holdings. Public debt and equity as well as private debt all booked declines due to loan sales and deleveraging.

Click on the attachment below for the full DTZ Money into Property 2014 report