LOS ANGELES—At the annual Milken Institute GlobalConference last week, Lew Feldman,partner and Los Angeles chair of Goodwin Procter,led a group of industry experts through a discussion of the world'smost ripe investment markets. The experts on Feldman's panel, Wherein the World Are Real Estate Opportunities, includedWilliam Kahane, CEO of RCSCapital; William McMorrow, chairman andCEO of Kennedy Wilson; JonathanPollack, global head of commercial real estate and head ofrisk for structured finance at Deutsche Bank;Henry Silverman, global head of real estate andinfrastructure at Guggenheim Partners; andSam Zell, chairman, Equity GroupInvestments.

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To kick off the discussion, Feldman showed the ranking marketsin the world. New York City topped the list with $47.2 billion incommercial real estate volume, followed by Londonand Tokyo, which have $44 billion and $31.8 billion in commercialreal estate volume. Los Angeles ranks fourth on the list, showing acommercial real estate volume of $27.4 billion, followed by severalother US gateway cities, including Washington D.C., San Franciscoand Chicago.

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In terms of global investment opportunities, many of the expertson the panel were looking at emerging markets,which, overall, have a projected GDP growth of4.9% in 2014 and 5.4% in 2015. Comparatively, the US GDP growthpredictions were 2.8% in 2014 and 3.0% in 2015, while Europe, whichis coming out of a recession, shows an estimated GDP growth of 1.2%in 2014 and 1.5% in 2015. The top emerging market for real estateopportunities, according to Zell, is Colombia. “Colombia isdramatically benefitting from the free trade agreement with theU.S. We're also significantly impacted by the change in the capitalmarkets in Colombia,” he said on the panel. Focusing on LatinAmerica, Zell also noted that Brazil is a market his company islooking at due to shrinking growth, limited capital and lowcompetition.

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Other panelists, including Pollack and McMorrow, were impressedby opportunities in Spain, which is attracting US privateequity funds and financial institutions. “The governmentis going through kind of a forced liquidation of assets in theirbanking sector, so that creates interesting investmentopportunities,” said Pollack. “They have also instituted somereally interesting reforms that should set Spain up to be anoutperformer in terms of growth in the Euro region over the nextfew years. I think those two things combined make it a reallyinteresting place to spend time.” According to McMorrow, KennedyWilson is focusing on several European markets, highlighting Dublinas another focus. He explains that 80% of the company's capital isbeing invested in European markets.

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Feldman also turned the conversation to discuss the impact ofinterest rates, which most investors believe willrise; however, according to Pollack, interest rates are really adriver for returns. “We'll see this trend continue where we areseeing interest rates as the driver for returns, and I think thatthis low interest rate environment is not only helping drivereturns but it is helping lower return expectations, which isdriving up real estate value,” he said. The market, particularly inthe US, is also flooded with capital, which has the potential for adangerous situation; however, Pollack said there isn't the sameleverage in play as in 2007.

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While multifamily has been the most active realestate investment market, Feldman wondered if the sector wasbeginning to taper. McMorrow took the question, explaining thatKennedy Wilson is continuing to find great opportunities in thesector, particularly on the West Coast (the company recently spent $167 million on three West Coastproperties) and in European markets, like Dublin,where rent growth is continuing to climb. He adds that averageinterest rates for the past 10 years have been 6%, and KennedyWilson thinks that is a good number. However, while the company isactively buying multifamily in markets throughout the country, hereminded that it also constantly prunes its asset base.

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Zell, on the other hand, was quick to note the importance ofdemographics in the multifamily industry, talking about a shiftfrom homeownership to renters. In the future, he believesmultifamily will be much more prevalent than single-familyhousing, and much more urban as demographics shift towardcities.

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.