Paine sees a modest recovery materialising in most global real estate markets, leading to improved tenant demand as occupier confidence and business investment increases.
“Although confidence has taken a few steps back in the recent market volatility, vacancy rates have generally been falling globally and strong rental growth has been recorded in some of the highly cyclical, supply-constrained office markets such as Hong Kong, London and Paris,” he said.
“Elsewhere, there are signs performance is becoming more polarised between the Asian markets, where reasonable economic growth is expected to continue and the weaker Western markets, where recovery remains muted.”
Paine believes amid the recent market turmoil, Asian markets had remained resilient.
“Real estate markets are a product of the underlying economy and, despite signs of a slowdown in Australia, the Asian economies generally remain buoyant,” he said. “Concerns about a slowdown in activity in Singapore and an increasingly tight labour market in Hong Kong have emerged. However, the region’s robust underlying growth dynamics are expected to continue to underpin real estate markets.”
Overall, with interest rates generally anticipated to be lower for longer, Paine suggests yields on global real estate remain attractive in comparison to other asset classes, adding the key drivers for real estate are favourable, unless a major recession appeared, so investors should reasonably expect positive total returns over the coming two to three years.
“However, investors need to be discerning,” he warned. “Within each global region there is a degree of polarisation and the fundamentals of demand and supply vary markedly within the sub-markets that make up each area.”
