Selection of cities, buildings crucial to property income – report

Despite headwinds from the economic and financial situation, real estate in European cities such as London, Paris, Munich and Stockholm is delivering a strong performance.

A report from Invesco Real Estate highlights that despite a recent slowing in the volume of real estate transactions, there are some bright spots for investment in cities in the United States, Asia Pacific and key gateway cities in Europe.

The most favourable outlook for real estate in the coming year is in the US and Australia. Many US cities have recently performed well and are expected to continue to deliver strong returns in 2013-2015. Beyond this, growth cities in the Asia Pacific region and European gateway cities are also expected to outperform and account for a large proportion of real estate transaction volumes.

Invesco Real Estate has been providing real estate investment services since 1983, first in the US and then Europe and Asia. Globally, it has €39.3bn of assets under management and over 330 staff in 17 offices. In Europe, these are London, Munich, Madrid, Paris, Prague and Luxembourg. 

Timothy Bellman, head of Global Research at Invesco Real Estate, said “gateway cities” are likely to outperform both national economies and smaller cities. “In these locations, with limited product available, some investors may wish also to consider value-add and development strategies to create core real estate in gateway cities.  Other investors may wish to consider the very best assets in second tier markets.” 

In Europe, large international tourist hotel brands in major European cities should continue to offer attractive income returns as they continue to benefit from wealthy visitors from the emerging markets. The office market is expected to deliver stronger total returns compared to other sectors in many cities in the Asia Pacific region and the US.

Supply constrained gateway office markets are expected to deliver the best short-term returns and see the earliest recovery in occupier demand, which will drive rental growth. The office sector is traditionally more cyclical than other sectors and global investors are now starting to look towards cyclical opportunities in some gateway cities.

Globally, the retail sector is expected to be strongest in dominant parks, shopping centres and destination high streets where there is a luxury brand presence setting a higher rent level, the report showed.

 

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