Be Informed
erspectives
on investing in commercial real estate in Jamaica
W
hen we speak of investors, we generally include a wide range of institutions (public and private), such as financial, investment trusts, groups of individuals operating as syndicates as well as individuals. Investments made by these entities are critical to the overall well-being of the national property market. In a dynamic market there is a high level of activity in the acquisition, development and sale of real estate. There are several reasons for investing in real estate interests, such as freeholds and leaseholds, which include:
share of each of the main asset classes in the portfolio, which may include money market securities, bonds, shares and property. Each of these may be further divided into sub-classes, for example, the property market sector may be subdivided into retail, offices, residential and industrial. Choice is broadly governed by two factors; the risk tolerance level of the client and the manager’s estimation of the risk and return features of each of the asset classes. The investment value of real estate falls into two categories: user and investor. The value to the user consists of its ability to serve the needs of a trade or the alternative being the more common one of satisfying the needs of living accommodation. On the other hand the value to the investor derives from its ability to act as a store of wealth which produces either income, or capital gains or both and this is a fundamental point related to property as an investment class. It is generally accepted that the main benefit of investment in real estate is rent. Investing in property creates both an asset in use and an investment and scholars have stated that to a considerable extent, those factors that increase value in use will also increase the value of the investment.
1. Advantages over stocks and bonds. Investors may perceive property from time to time as being advantageously priced over stocks and bonds, and invest for short or long term gains. 2. Leverage. Where real estate purchase is financed by debt and finance costs are fairly fixed, then value can increase to exceed debt, resulting in favourable equity gains. 3. Risk diversification. Investors and financial institutions can use real estate to diversify risk in multi-asset portfolios which may include a mix of property, shares and bonds. 4. Institutional reasons. Some owners, such as The University of the West Indies, Commissioner of Lands an ?????????????????????????????????????????????M???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????%??????????????????????????????????????????????????????????????????????????????????????????())???????e????????????????)9??-????????????????????????????????????????????????????????????????????????????)????????????????????????????????????????????????????9??????????????????]????!??????????????????????????????????????????????????????????????????????????????????????]????????????????????????????????????((??()A???????M?????((0