Investors look to expand property portfolios

Investors look to expand property portfoliosLow interest rates and a steady cyclical recovery in global markets prove positive for property values, finds the LaSalle Investment Management’s Mid-Year 2015 Investment Strategy Annual.LaSalle’s twice-yearly Investment Strategy Annual looks at investment trends around the world and highlights the best future investment opportunities. Globally, investors are likely to expand real estate allocations as they look to the stable incomes produced by core assets generating healthy yields when compared with sovereign and corporate bonds. At a time when asset prices are high, real estate’s valuation metrics – such as replacement costs – are attractive to investors, and the sector’s low covariance with other asset classes provides diversification benefits.The ability of investors to create wealth by developing and leasing buildings also produces a reasonable risk-reward proposition in a rising market.Jacques Gordon, LaSalle Investment Management’s global head of research and strategy, says that a number of the cyclical trends have “played out even faster and more intensely” than analysts predicted.Gordon advises that the best “cycle insurance” is to “keep leverage levels at the conservative end of the acceptable range”. “Investors should avoid compromising on asset quality and stick to deeper tenant markets as we enter the late stages of the value cycle,” Gordon explains.”When a property’s ability to attract tenants is compromised in a recession, weaker properties in smaller markets nearly always suffer the greatest drops in value.”LaSalle Investment Management currently has $56 billion of assets under management.