Successful real estate investing in 2002 will require a careful balancing act, according to Investment Strategy Annual, a comprehensive survey of the global real estate markets from LaSalle Investment Management.
â€œReal estate investors will need to adopt a defensive posture in the face of the global downturn, while positioning their portfolios for an eventual economic recovery,â€ said Jacques Gordon, Ph.D., LaSalle Investment Managementâ€™s Managing Director of Global Investment Research and editor of the Investment Strategy Annual report. â€œ2001 is the first year since 1974 in which all of the worldâ€™s major economies experienced a decline in their rates of growth. However, real estate has, for the second consecutive year, displayed its value in a multi asset portfolio, comfortably outperforming stocks and at least matching bonds.'
â€œInvestor expectations for 2002 are very different from those of 12 months ago. Real estate is not immune to the effects of the global slowdown,â€ he continued. â€œWhile we may not see the stellar returns we saw in 2001, we expect real estate to continue to perform as advertised, with much greater price stability than equities and yields higher than bonds. The seventh edition of LaSalleâ€™s Investment Strategy Annual shows real estate investors how to weather the current storm and exploit the recovery that will follow.â€
Drawing on a global network of research professionals, Investment Strategy Annual provides a region-by-region analysis of real estate markets. Some of the findings include:
Â· The U.S. real estate market faces serious challenges in 2002, with slow or negative economic growth limiting demand across all sectors. However, U.S. real estate markets are much better positioned than in past recessions, and high income yields and relative stability will attract continued investor interest. In addition, low interest rates have made leverage opportunities more attractive than theyâ€™ve been for 30 years. LaSalle recommends a cautious approach, emphasizing predictable income-producing investments. Investors with more tolerance for risk can use 2002 as the year to position a real estate investment for the recovery in 2003.
Â· European economic growth was slower than in the United States until 2001. Today, however, Europeâ€™s relative prospects look better than they have for some time. While growth estimates have been reduced after the events of September 11, most economies should avoid an outright recession, so the effect on vacancy and absorption rates should be limited. LaSalle believes that Europe currently offers both structural opportunities as the unification of the European Union takes hold, and cyclical opportunities for investors to position themselves for the eventual economic recovery.
Â· Asia offers global investors higher returns, but also higher risks. Throughout much of Asia, the traditional local sources of capital are on the sidelines, and banks are working their way through mountains of troubled loans. Opportunities range from taking advantage of the divestment of corporate-owned real estate in Korea to bailing out troubled developers and banks in Japan and Hong Kong. The Japanese real estate market is reaching a crisis point, and patient investors will do well now that buying opportunities include hard assets, in addition to non-performing loans.
(source: LaSalle Investment Management, Inc.)