Real estate allocation increases expected

Commercial real estate specialists Colliers International has predicted that global investors will shift around $400 billion into real estate over the next three to five years to stabilise returns and diversify portfolios.

Just over half (52%) of investors in the research compiled for the Colliers International 2016 Global Investors Outlook said they were adding to real estate allocations. In fact, the scale of the allocation to property is expected to help smooth out the usual peaks and troughs of the property market cycle. According to Colliers International, Japan’s Government Pension Investment Fund, which has posted huge losses, announced that it would be moving an estimated $65 billion into commercial real estate, while it is expected that Chinese insurance companies have a similar sum to invest in property. A spokesman said: “Such investors demand high value assets so they can deploy large amounts of capital in one go. This is why big cities such as London and New York have become such hot markets with yields crunching well below four percent on prime office buildings.”

Colliers International chief executive officer UK & Ireland, Tony Horrell, said: “While I am aware that Gordon Brown’s infamous pronouncement over ending boom and bust cycles eventually ended in tears, the weight of evidence I see suggests that there is considerable life left in this redefined prime cycle. In real estate, the days of ‘pass-the-parcel’ are over and long-term secure investment in core markets will be the norm.” Legal & General Investment Management Real Assets director of research, Rob Martin, commented: “With so much structural change in the sectors which have traditionally dominated portfolios, we continue to see a growing role for alternative sectors such as build-torent residential and healthcare in delivering the stable and growing cash flows that investors seek from real estate.”