UK real estate market attracting strong investor appetite.
Standard Life Investments, the global real estate manager, believes the UK real estate market and core markets in Europe are attracting strong investor appetite, which is expected to drive returns in the second half of the year.
Speaking in Australia this week, Nalaka De Silva, Real Estate Investment Director, Standard Life Investments, said: “The UK has made a notable recovery, showing stronger growth than Continental Europe. We particularly favour the central London office market and large-scale regional shopping centres, as well as the South East UK office and industrial markets, which we expect will remain attractive in the near term.
“In continental Europe, we favour core markets such as France, Germany and Sweden, where strong investor appetite is expected to drive returns in the near term. There is also opportunity in the periphery markets such as Italy and Spain which look promising over the next 12-18 months from a pricing perspective.”
Standard Life Investments’ research highlights that only now is the wider European economy regaining some momentum after the global credit crunch and sovereign debt crisis, driving an increase in risk appetite.
“Many real estate investors are looking to move up the risk curve. As they do so, investors need to identify the most suitable strategy, or blend of strategies that they can employ to add or reduce risk within a European real estate portfolio. This requires an understanding of individual market characteristics and what future economic and real estate cycles may look like.
“In Asia Pacific, our preference is for higher-yielding sectors such as Australian logistics, along with growth sectors such as Japan offices. In Northern America, we prefer markets that have further upside from tight fundamentals that are positioned to generate relatively sturdy income, these include markets such as San Francisco and Seattle offices along with Mid-Town Manhattan offices.
“Our three-year view anticipates that global real estate will continue to outperform cash,” Mr De Silva said.
