Europe Still Mad for Real Estate

LONDON-As the European economic recovery falters and shares continue todisappoint investors, real estate has firmly established its place at theinvestment table, according to Market Watch, a global real estate marketforecast from LaSalle Investment Management (LIM).

But LIM cautionsthat the stock market volatility does pose some risks for UK real estate,particularly where the top companies in the financial sector are located”The case for adding real estate to a mixed-asset portfolio has never beenstronger,” said Jeff Jacobson, chief executive officer Europe for LIM.”It’s a low-correlated asset class and, as such, it marches to its ownrhythm. It is not that real estate is somehow ‘better’ but simply that itis different. It is this difference that reduces the risk of the overallportfolio and therefore improves risk-adjusted returns over time forinvestors.”

The report highlights the solid returns achieved by property. Over the five years ending in 2001, privateun-leveraged annual real estate returns averaged 12.2 percent, while largecap stocks averaged 10.6 percent. Over the past 20 years, public andprivate real estate have averaged 12.8 percent and 8.1 percent,respectively.

And more recently real estate in the UK and continental Europe has held up well in the faceof weak economic conditions and volatile stock markets. “UK direct propertyhas now produced better returns than equities in ten of the last 11quarters and, though hard market data are not available in the other mainEuropean markets, the same is almost certainly true for them,” said RobinGoodchild, European director, LaSalle Investment Management.