Real Estate Investor Magazine South Africa March 2015 | Page 52

Listed

International
Property Trends
BY GRANT LOWTON

T

he performance of the various listed real estate
markets in the year ahead will depend on a
number of factors, including the outlook for
economic growth and interest rates. In the United
States for example, looming interest rate hikes may
serve to initially have an adverse impact on property
values due to higher discount rates being applied to
property income streams. However, solid underlying
growth in the region (which will be the basis for the
anticipated interest rate hikes) will result in strong
performance by the more cyclical property sectors. The
significant themes that affect property in 2015 are:
Unsynchronised economic and financial market cycles
An uneven global recovery is underway and expected
to continue, with the anticipation some nations will
show solid progress, whilst others are in fact expected
to recess economically over forthcoming periods.
Importantly, differing monetary policies are expected
globally in terms of timing, direction and magnitude.
Lower oil price, disinflationary boom
It is expected the lower oil price will continue to result
in significant shifts of income from oil exporting
regions to importers. The current outlook is the value
of consumer-orientated properties (e.g. retail related)

must continue to appreciate due to increased consumer
confidence and spending, particularly in the US. The
lower oil price has put a cap on inflation, all whilst
global growth is expected to tick upward.
Urbanisation in the US
This is an overwhelming prevailing secular trend. Firms
and individuals are willing to pay increasingly higher
rents to be situated and live closer to Central Business
Districts (CBDs). This significantly increases the
demand for office and apartment space. An additional
driver of the demand for apartment living is the large
number of millennials who have been living with their
parents and now want their own apartments.
US Life Sciences/biotech boom
Capital formation in the US biotech and Life Sciences
industry has taken off during the past couple of years.
The wall of money chasing after “the next blockbuster
drug” has meant the demand for biotech lab/office
space has been on an upward trend. This has benefitted
REITs that cater to the needs of these biotech firms
and own properties situated at the major epicenters of
biotech activity.
A key consideration for investors regarding the
outlook for global property in 2015 is to be selective
and focus on regions with the best expected growth
rates. Property investors need to be cognisant of the
effect expected interest rate changes can have on the
performance of respective global property markets.
In the US, for example, our portfolio is focused on
property sectors that are more tied to the economic
cycle (hotels, self-storage) and which have shorter
duration leases. In our view, these types of properties
generally outperform in times of rising interest rates.

RESOURCES
Reitway Global Property
52

March 2015 SA Real Estate Investor

www.reimag.co.za