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- March 1, 2018: Vol. 12, Number 3

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Realignment time: With good returns harder to come by, managers are recommending a re-positioning of portfolios as they hunt for yield

by James Buckley

Europe’s economy is enjoying a period of growth, but with real estate investment markets at an advanced point in the cycle, stellar returns are becoming harder to find.

“It is definitely a challenging environment for real estate investment managers to continue to meet the return requirements that investors have been used to historically without taking on more risk,” observes Mads Loewe, executive director – business development at Aerium.

A recent report from Aviva Investors claims that 2018 will be the final year in which investors can expect strong returns on European property, forecasting total returns of 6.7 percent across prime European commercial real estate assets this year. Looking further ahead, the average annualised return is set to be much lower between 2018 and 2022, at 2.6 percent, it says. A normalisation of yield levels from 2019 is the main reason behind the investment manager’s forecasts for softer returns, with the impact unlikely to be suf

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