In this low interest rate environment, yield-hungry investors have been moving out of bonds, and many are opting for real estate investment opportunities. Combine that with a structural undersupply of institutional quality real estate in many key cities across the globe, and an attractive case for investment starts to emerge. Here’s where we see the most attractive and promising opportunities by region this year.
US
In the US, we see the multifamily (apartments) sector as the most attractive opportunity. The US market is currently experiencing accelerated existing rental property growth given a dearth of new construction projects. Multifamily properties, however, have been the exception to that trend as new construction increased for that sector in the first quarter, bringing it closer to the long-term average.
Europe
The European market is currently divided. There are some parts of Europe, such as Spain and Greece, that are plagued by slow economic growth, which has weakened tenant demand. In perceived safer markets — such as Germany, Poland and London — we have seen strong capital flows and tenant demand that has outpaced supply.
Asia
Japan has been leading the growth in Asia with its strong share price performance, particularly in the Tokyo office market, where tenant demand has been strong. However, we believe investors should exercise a bit of caution with Japan, as its performance growth might be more the result of monetary policy than changes in its fundamental real estate landscape.
Outlook
For the remainder of the year, we expect the focus on income by investors to continue as interest rates are likely to remain low. In this environment, we believe the case for real estate investments may be compelling, and that understanding local market economic drivers is vital to navigating this asset class.
Learn more about why 2013 is a year for real estate.
Important Information
Investments in real estate related instruments may be affected by economic, legal, or environmental factors that affect property values, rents or occupancies of real estate. Real estate companies, including REITs or similar structures, tend to be small and mid-cap companies and their shares may be more volatile and less liquid. The risks of investing in securities of foreign issuers can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.
The information provided is for educational purposes only and does not constitute a recommendation of the suitability of any investment strategy for a particular investor. The opinions expressed are those of the author, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
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