- July 1, 2014: Vol. 6, Number 7

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A trial of strength: Improving real estate market fundamentals should offset potential interest rate headwinds

by Timothy Bellman

Looking forward, as economies improve, increasingly real estate performance may be driven as much by improving market fundamentals as by strength of capital flows. As a result, variations in both the local pace and timing of strengthening market fundamentals will likely differentiate the growth of real estate values at the asset level and across cities and sectors around the world. Yet, at the same time, those values will also be influenced by macro conditions and the relative attractiveness of other asset classes. How may these intertwined forces play out in 2014–2016?

The changing balance of risk

A simple conceptual framework of the outlook for real estate and the attendant risks is shown in “The outlook, and the risks to the outlook” chart in the print edition. It is predicated on the notion that most risks associated with real estate investment can be grouped into two broad categories: occupier market fundamentals and capital markets.

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