According to a white paper from JPMorgan Asset Management (JPMAM), a “structural long-term” re-weighting back towards real estate appears to be underway. The study claims that another €1000bn could be pumped into real estate over the next six to eight years.
The mean figure for European real estate asset allocation masks disparities between diffferent countries, with investors in Italy devoting as much as 21.25 per cent while Austria allocates only one-fifth of one per cent. By contrast, Japan’s figure is a modest 1.0 per cent and the US 3.4 per cent.
Nick Tyrell, director of research and strategy for JPMAM Real Estate’s European team, revealed that a mean variance optimisation model was used to evaluate the best combination across a range of asset classes – cash, real estate, bonds and equities. This involved a fairly high real estate allocation.
He added that a distinction must be drawn between the occupier and investor markets, which are at different points in their respective cycles. On the investor market side, secondary cities in France such as Marseilles and Lille and certain Scandinavian cites could offer potential, where rental growth is seen but where the pricing may not have “not fully adjusted” to growth expectations.
A study by Lusenti Partners revealed that Swiss institutions reaped an average return of 2.9 per cent on properties in direct ownership and 4.9 per cent on indirectly-owned real estate in the first half of 2005. This performance was slightly lower than the average for the last five years.
