Today, many sovereign wealth funds are active investors in property, both directly and indirectly. Although SWFs still face barriers to entry, particularly in the United States, their importance as a source of capital is continuing to grow.
In 2009, the significant increase in equity values, contrasted against the severe contraction of real estate values, allowed the equity markets to outperform the non-listed real estate market. Despite these recent conditions, risk-adjusted returns for real estate over a 10-year timeframe remain attractive relative to bonds and have far exceeded the equity market.
If there is good news anywhere in the commercial real estate world these days, it’s in the REIT market. Buoyed by improving capital markets in general and sustained by an influx of funds from investors, REITs have weathered what looks to be the worst of the economic downturn, churning out mostly positive returns along the way.
Real estate investment managers around the globe continue to suffer from adverse conditions in the financial markets and property markets, although there are some rays of sunshine starting to emerge through the dark clouds. Property indices in Europe and the United States are reporting shrinking levels of depreciation in most markets. Most Asian economies are registering strong growth, while the United States and many European economies are on the upswing.
Who would have thought 12 months ago that a real estate recovery was possible? The financial markets were in ruins, we were three years into a total residential and related mortgage market collapse and the commercial real estate markets were following closely behind. The idea of buying land at that time was almost out of the question. My, how things can change in a year.
A few years ago, before joining IREI, I lived in the coastal mountains of Southern California in Silverado Canyon, a small mining town that extends into Cleveland National Forest. In October 2007, an arsonist started a fire near our home. At first we thought we were safely out of the fire’s reach, but we soon decided to evacuate. We packed up the pets and all of the irreplaceable keepsakes we could fit into our car and left.