Real estate capital markets have raced ahead and ignored distinctions between the fundamentals in low-growth and high-growth countries, according to LaSalle Investment Management's mid-year update to its Investment Strategy Annual (ISA) report.
Real estate capital markets have raced ahead and ignored distinctions between the fundamentals in low-growth and high-growth countries, according to LaSalle Investment Management's mid-year update to its Investment Strategy Annual (ISA) report.
Given the nervousness and volatility in other asset classes - most notably European sovereign bonds, Asian stocks, commodity prices and US Treasuries, the relative lack of caution in the real estate capital markets is the biggest worry at the half way stage in 2011, the report suggests. This has shown itself through intense bidding for core assets in several major markets and through the robust capital raising activities of listed real estate companies.
Nevertheless LaSalle says there was justification for the perception among lenders and investors that real estate income streams are now at, or just past, trough levels and are once again climbing, even in the low-growth countries. In growth markets, real estate rents and cash flows have been moving upwards rapidly for 12 to 24 months, depending on the specific property type and market. In both cases, LaSalle believes that the capital markets are pricing several strong years of continued growth in the future.
'It is remarkable how quickly capital has returned to real estate,' said Jacques Gordon, global strategist at LaSalle. 'The re-emergence of a competitive credit market, so quickly after the bursting of the credit bubble, is also astonishing. Although investing in a capital-rich environment is challenging, opportunities for harvesting gains and recapitalizing assets are now much more executable. Also, capital is moving much more slowly in the near-core, value-add and financially-distressed sectors; we still see good value there.'
