Varying global recovery speeds pose headaches for real estate investors in 2011, according to analysts

Written by Ray Clancy

Wednesday, 15 December 2010 15:05

Real estate investors face a challenge in devising strategies for 2011 due to the varying speeds of recovery across the global economy, a new report suggests.

In Asia Pacific, where there is strong growth, development and leasing will provide some of the best investment opportunities, while edge-of-core properties will be attractive in the UK, France and the US where there has only been a modest rebound, the report from LaSalle Investment Management group says.

‘Investment performance in the rapidly growing countries will be volatile, due to the waves of liquidity that wash over these less mature markets,’ said Jacques Gordon, global strategist at LaSalle, a unit of Jones Lang LaSalle.

‘Growth strategies that take advantage of rapid urbanization and a burgeoning middle class will be most successful,’ Gordon said, adding that the best opportunities include selective residential developments in China’s second tier cities.

For countries seeing low growth, such as Japan, the UK, the US and in the eurozone, LaSalle said real estate investment performance could get a boost from low interest rates and a rising flow of debt and equity capital.

‘While investor appetite for risk starts to grow once again, value-add and opportunistic investing will be more attractive in the States, with core investing showing the most signs for improvement,’ said William Maher, LaSalle’s head of US strategy.

He forecast US transaction volume at between $150 billion and $200 billion by the end of 2011, with the most attractive core opportunities in technology, healthcare and entertainment. He said some of those areas would benefit from pent-up demand and could outpace the national average.

In Europe, investors seeking higher returns, especially in the UK, Spain, Germany and France should look to banks that are trying to reduce their exposure to property as a potential source of deals, the report said.

It also recommended focusing on retail and central London offices and avoid regions outside the UK’s South East, and to target retail and logistics in Germany and France, as well as offices in France.