In a world of low interest rates, asset prices are booming. Yields are at record low levels for both sovereign and corporate bonds. The cyclically-adjusted price-to-earnings ratio for the S&P 500 has only been higher in 1929 and at the peak of the dot.com bubble, while the FTSE 100 Index is trading at new record high levels in the range of 7,500.

But the economic environment is also relatively benign, with leverage under control, consumption in a positive patch and capex recovering.

This article will argue that, with a favourable economic environment and relatively low supply across property sectors, strategies delivering attractive returns can still be found by taking the adequate level of risk. This article discusses different aspects of risk, relating to liquidity, micro-location, lease management and development, which battles are worth fighting in today’s market, and which aren’t.

The environment

The European economy is solid