He believes that, in a world of relatively modest yields from most assets, where interest rates are generally anticipated to be lower for longer and international economies are slowly recovering, investors should consider how global real estate could fit into their portfolios.
Supply and demand matter for property - future supply remains constrained in many markets and there is often a low level of empty good quality buildings, while improvements in tenant confidence is translating into increased occupier activity and demand for space.
Such a situation is generally a precursor for rental growth and hence higher future returns.
All in all, Kinnie considers investors can reasonably expect a relatively secure and stable income in the region of 5-8% a year, on average, globally, over the next few years, with total returns approaching double digit - on the key assumption of continued global economic expansion.
He said: “As ever, ‘caveat emptor' (or buyer beware) applies. Location, location, location matters for real estate, where quality can vary widely from building to building, city to city.
“Within each of the three main real estate regions (Europe; the Americas and Asia), performance is expected to vary widely. For example, although much of Europe is seeing improving economic conditions, and consequently increased occupier confidence and demand for space, this is not the case in most of the peripheral European markets.
“Many such cities are already suffering from a high level of empty space and modest demand, alongside the possibility of sovereign default. The prospects for property in, say, Portugal, Ireland and Greece remain poor, for Paris much superior.
“At this point in the economic cycle with global economic growth gradually improving and most asset class yields generally remaining relatively modest, investors can benefit from the attractive attributes which global real estate can add to a diversified, multi-asset portfolio.
“In many countries, a secure and steady income yield of 5-8% a year will be attractive, while constraints on future supply should provide investors with some comfort if inflation becomes elevated. However, careful selection of markets and individual assets remains paramount.”
