2010 is more likely to be a promising year for property investment across most market sectors, according to the 16th Investment Strategy Annual released today by LaSalle Investment Management. The annual report includes a comprehensive survey and outlook of the global property market for 2010.
Its report shows that decline of values has stopped in most major markets and investor confidence is starting to be restored. Market pricing is improving and transaction volume is rising. LaSalle expects further re-alignment in the pricing of risk next year, with deal flow modestly increasing as sellers gradually come out of denial. Investors should seek suitable balance between inappropriate risk tolerance during economic uncertainty, and total risk aversion, which is already resulting in a surplus of capital targeting some ultra-safe deals.
Commenting in the said report, Jacques Gordon of LaSalle’s Global Strategist said, “Overall, investors in commercial real estate should be cautiously optimistic about the outlook in 2010. However, as a late cycle participant in the general economic recovery, real estate will behave differently from other asset classes. The income streams from leased buildings weathered the global recession in remarkably good shape, but as leases mature in generally weak markets, net operating income will be under downward pressure in many countries for several years to come.”
“At the same time, in terms of stimulus packages and bail-outs, commercial property has been treated quite differently from residential real estate, banking and other industry sectors. And private equity prices have not yet recovered as robustly as stocks or bonds. All these differences mean that real estate’s diversifying power in a portfolio will be restored.”
LaSalle recognizes that investors have a good reason to be risk averse but believes that next year, they can expect more reasonable pricing as well as very good opportunities. As they formulate investment strategies for the next two years, investors with a clear view of returns can prosper, LaSalle said.