LONDON, 16 August 2018 – Whilst political and economic uncertainty continue to make investors nervous, it is crucial for investors to focus on real assets. The steady source of income and low volatility make commercial real estate (CRE) a safe harbour during times of turbulence in the investment environment.
Ken Riggs, President of Situs RERC, states that “For investors, it’s ultimately about risk and return compared to alternative investments such as stocks and bonds. CRE has come a long way in fulfilling investor requirements as a viable investment option because of its strong risk-adjusted returns, which capture many of the investment traits of CRE.”
These and other issues are explored in the latest Situs RERC Real Estate Report – European Edition, which presents an analysis of the European political and economic environment and their impact on CRE, including analyses of the major European regions and property types.
The wildly fluctuating political environment will continue to be a major contributor to stock market volatility. Despite a signal from the European Central Bank (ECB) that rates will remain unchanged for the next year, the winding down of the ECB’s asset purchasing programme (APP) may produce some volatility in the bond markets. Additionally, interest rates remain at historic lows, reducing demand for bonds. Focusing on real assets will help investors weather the next downturn. According to European investors surveyed by Situs RERC in 2Q 2018, political unrest and future interest rate hikes are by far the biggest potential pitfalls for CRE.
Taco Brink, Managing Director and Head of Situs RERC Europe & Asia, adds, “As a real asset, CRE offers consistent cash flow, downside protection, tangibility, and low correlation with other asset classes. CRE has enjoyed an upward momentum in prices and values during this past business cycle. Nonetheless, the recovery phase after the Global Financial Crisis (GFC) is becoming long in the tooth, increasing the probability that we are due for a CRE correction.”
However, we are unlikely to be headed for another GFCs, particularly in the CRE market. Despite rising asset prices, strong economic data and strong CRE fundamentals – including rent levels – are supporting these prices.
“In general, the markets seem to be making reasonable and rational investment decisions and CRE pricing is consistent with market realities, indicating that the next downturn – whenever it occurs – should prove to be a manageable correction, not a major crash,” says Riggs.
The Situs RERC Real Estate Report – European Edition also presents the results of its 2Q 2018 European Investor Survey, which provides investor sentiment regarding capital availability, lending conditions and investment recommendations, among other topics. To download your free copy, click here.
ABOUT SITUS AND SITUS RERC
Situs has been the premier global provider of strategic business solutions for the finance and commercial real estate industries for over 30 years. Situs RERC, a wholly owned subsidiary of Situs, is one of the longest-serving and most well-recognized national firms devoted to valuation management and fiduciary services, appraisal and litigation services, and research, risk analysis and publications. A rated servicer with Moody’s, Fitch and Morningstar, Situs has more than $165 billion of assets under management and is ranked a top 20 servicer in multiple categories by the Mortgage Bankers Association. In 2016, Situs received a second consecutive “Advisor of the Year” award by Real Estate Finance & Investment magazine, and the “Capital Advisor Firm of the Year” award by Property Investor Europe. In 2017, the firm won the “Industry Contributor of the Year” award from Real Estate Finance & Investment magazine.
Ken Riggs, CFA, CRE, FRICS, MAI
President, Global Head of Situs RERC
+1 312 587 1900
Taco Brink, CRE, MRICS, MAI
Managing Director, Head of Situs RERC Europe & Asia
+44 (0) 20 7220 1874