Aviva Investors says a recovery in UK real estate appears to be accelerating while Eurozone properties are being closely watched by its investment team.
Chris Urwin, global real estate research manager at Aviva Investors, says that as the economic backdrop improves, higher-yielding value-add strategies look increasingly attractive as higher yielding properties will outperform prime assets over the next five years.
Aviva still prefers defensive assets in Europe and, overall, favours real estate tied to logistics in Asia Pacific as a means of capturing the rise of online retailing, with a focus on Australia, Japan and China.
Urwin says: “In the UK, we expect the nascent real estate recovery to continue to gather pace in the short-term. The market is now in a recovery phase with both prime and secondary assets experiencing capital growth across many parts of the country.”
He adds that the recent increase in UK government bonds does pose medium term risks to the relative attractiveness of the lowest-yielding real estate segments, including central London markets but opportunities elsewhere compensate for this.
In continental Europe, Urwin says investors could focus on high quality assets with secure income streams in core European economies such as Germany and Sweden.
“In addition, we are confident that prime Irish real estate provides an attractive long-term investment opportunity. As the economic situation continues to improve, we will be watching peripheral economies closely to see where the next cyclical opportunity arises. In our view, there is likely to be significant scope for growth once a turning point is reached.”
Aviva Investors manages £21.45 billion (€26.38 billion) of real estate assets in the UK, Europe, Asia-Pacific and the Americas.
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