Global hubs lead in property investment returns

The worldwide real estate market recovery continues, but assets located in global hubs appear disproportionately likely to outperform in investment terms, according to new research from global real estate fund managers PRUPIM.

According to PRUPIM’s latest report into the property investment climate, Asian markets are spearheading the resurgence in rental values ahead of Europe and North America but interconnected cities were best placed to perform globally.

Richard Gwilliam, deputy head of Research at PRUPIM, said macroeconomic and demographic forces point to continued rental growth in Asian markets, with the risk of some overheating as investors may be overpaying for prime property. He also sees a north-south divide in Europe, where the south will continue to be a no-go-area for core investors, and slower growth in the US.

“However, as the property market becomes increasingly global and transparent, we are seeing a ‘polka dot effect’, where assets in globally-linked cities are performing better than neighbouring locations. Increasingly, it may be that performance will tend to be as much a function of interconnectedness, as of national or even regional threats and opportunities.”

PRUPIM believes property around the world continues to be perceived as an attractive place for investors’ money, offering relatively high yields but with less risk than equities, and better returns than government bonds or cash. But concern over the robustness of the global economy is leading investors to focus on prime assets with secure income, and avoid secondary and tertiary property in non-core locations.

The report shows a marked difference across regions, with rental growth in the Asian markets by and large continuing to outstrip that of Europe and North America. Globally-facing core locations are performing better than smaller cities that are more reliant on their domestic economy, particularly within Europe and the US.

The PRUPIM report expects 2011 to be a year for investment in quality assets in core markets such as Germany, France and Scandinavia, as debt and currency issues cause turmoil in the peripheral European markets, which will remain no-go areas for institutions.

It is aso relatively positive about Asia Pacific, as the region’s economic growth is underpinned by buoyant domestic demand, capital inflows and demographic change.

PRUPIM, part of M&G, the investment arm of Prudential Plc in the UK and Europe, is one of the top 20 real estate fund managers in the world by assets under management and has around £16bn invested in a properties across Europe, North America and the Asia Pacific region.

To download the report, visit

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