Real Estate Investor Magazine South Africa February 2016 | Page 34

REITs

Global
Real Estate

Investment Trusts in 2016
Exciting new prospects for the coming year
BY WIM PRINSLOO

2

015 will be remembered as a tumultuous year for
global stock markets. The oil price plummeted,
the dollar skyrocketed and a slowdown in China
sparked significant uncertainty across the globe.
During these periods of high volatility it is
important to remind oneself that financial markets are
social structures. They should not be approached like a
natural science.
The year 2016 will, in all probability, again be a year
wherein every macroeconomic mishap will be greeted
with distressful headlines that additional shocks are just
around the corner. While volatility is indeed a feature
of our globalised world, we think that the basic effort
to evaluate trends in supply and demand; economic
growth; employment and demographics, continue to
form the basis of a profitable investment strategy in
listed real estate (“REITs ”).

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FEBRUARY 016 SA Real Estate Investor

We are deeper into the real estate cycle in many
countries, but fundamentals remain strong and
valuations are lower than this time last year. REITs will
receive an additional boon by receiving its own industry
classification later in 2016. Although it is difficult to
make a definitive statement about the market (as it is a
social science), one has to agree that the Global REIT
market currently has a lot going for it.

Global supply and demand dynamics

The all-important balance of supply and demand
has remained in check in large part because of
the discipline that has been exercised by property
developers over the last several years. It may not sound
like a cause for celebration, but the moderate pace of
economic expansion has substantial benefits for real
estate. Previous economic cycles saw rapid economic
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