Outlook for global property investment strong, according to asset managers

Income bearing assets provide firm foundations for global property markets as the outlook remains pretty positive, it is claimed.

A greater market focus on income bearing property assets seems likely, according to Alan Supple, portfolio manager at Urdang, BNY Mellon's global real estate investment specialist, and a member of the team managing the BNY Mellon Global Property Securities Fund.

While the US property market has performed strongly so far this year, Urdang maintains a cautious stance looking against the backdrop of continued economic uncertainty.

‘Our outlook for the global property securities market remains pretty positive, notwithstanding the fact that it has been one of the best performing asset classes in 2011 so far in the UK,’ said Supple.
 
‘We believe markets generally have entered a lower return, less leveraged environment. In the property world, it is clear that the availability of credit is going to be more constrained than in the past. In this respect, we find that the listed property sector is well positioned, as companies have already raised cash levels, meaning that the listed sector is therefore relatively well positioned to create value through opportunistic developments and acquisitions,’ he explained.

‘We expect to see an ever greater focus on income bearing assets, too. In the long term, income is the most important element of the total return from property assets. The bias in the listed sector towards high quality assets with long lease terms and good tenants means that asset valuations are backed up by good cash flows. Furthermore, it is important to reiterate the value of liquidity and transparency attached to listed investments,’ he added.

From a geographical perspective, Supple views Asia as offering good growth opportunities, but remains cautious about regulatory risks in Singapore, Hong Kong and China. Meanwhile, he expects to see continuing pressure in the Eurozone as a result of the slower economic recovery than has been seen elsewhere, and the continuing sovereign debt issues.

Nevertheless, he highlights Urdang's belief that there are some attractive stock picking opportunities in the region, notably in Germany which has shown significant resilience despite the problems elsewhere in the continent. ‘The Nordic region, especially Sweden, continues to enjoy moderate inflation, strong consumer spending, good levels of economic activity and above trend GDP growth,’ he said.

Looking to the world's largest property securities market, Supple concludes; ‘The substantial outperformance of the US market in the first half of 2011 has led us to be a little more conservative about the outlook. Our focus in the US market will therefore be on identifying the best sectors and picking the best stocks and, as elsewhere, we are confident that this will enable us to generate significant value for clients’.