Big Is Beautiful
For the same risk-adjusted returns, real estate investors will always prefer big real estate markets to small ones for the simple reason that big markets provide choice. The outlook for smaller markets, of course, can often be more favourable, but that point becomes moot when there are no opportunities to invest or when competition for the relatively few transactions that are available drives pricing to unattractive levels.
So it was no surprise, when Europe’s occupier markets began to recover and globally low interest rates fuelled easy lending conditions, that the big markets attracted the initial waves of investment capital. Suddenly, as yields compressed and capital values accelerated, asset pricing began to look really expensive. Not to be deterred, investors moved into different cities and other countries, and increasingly into more exotic products and property types.
A RISE TOO FAR?
The global search for yield and the increasing