LONDON, Dec. 15, 2016 /PRNewswire/ -- The UK will remain a key
investment market for domestic and global investors in 2017 but it is important to be very selective with opportunities,
according to LaSalle Investment Management's Investment Strategy Annual (ISA) 2017 edition.
Confidence in the UK occupier market held up much better than most expected immediately after the Brexit Referendum, and prime
assets have traded at little or no discount to their pre-referendum valuations, the ISA finds. But investors should be prepared
to encounter stretches of elevated capital market volatility in 2017-2018.
LaSalle remains a core income-focussed buyer in the market and will remain so for the year ahead, but this will not be at any
price, and must be under certain conditions. Depending on the opportunity, the business also remains committed to taking leasing
risk on assets in favourable locations in the UK, depending on market opportunities and taking into account the potential Brexit
impact on tenants.
Elsewhere in Europe, the ISA anticipates that occupiers and investors will continue with
their pre-Brexit business plans based on modest growth in Germany and France, and stronger economic performance in Spain, Poland, Sweden, and to a lesser extent, the
Netherlands. Furthermore, the report finds that competition for core income-producing real estate is expected to remain
intense.
Mahdi Mokrane, Head of Research and Strategy for Europe at LaSalle, said: "We believe
that the UK will remain one of the world's most transparent, liquid and supportive destinations for investors in spite of the
current uncertainty around the country's future relationship with the EU. Looking ahead, given the prospect of a hard Brexit,
fewer of the larger, longer-term occupier decisions are likely to be made until much of the volatility has dissipated."
In the UK, LaSalle will remain focussed on the following investment themes that are expected to outperform over the long
term:
- Long-leased retail that offer accessible, flexible and affordable solutions to ever-demanding retailers offer a defensive
investment profile.
- The private rented residential sector (PRS), which will be one of the clear winners in the years ahead given the chronic
undersupply of housing in many parts of the UK.
- The London office market may offer short term investors Brexit-led re-priced investment
opportunities whilst continuing to generate longer term investment options in attractive emerging locations.
- In a low-interest rate environment, mezzanine lending is one of our best income-rich strategies as a tighter regulatory
framework is also forcing traditional lenders into a more conservative and risk-averse stance.
Across Continental Europe, future elections could become socially disruptive and cause significant capital market volatility.
The short-term market impact in 2017 is likely to vary in magnitude depending on the global implications of the political risk.
In these countries, the ISA recommendations include the following themes:
- Core office investments in cities such as Paris, Amsterdam, Frankfurt and Munich should
outperform average EU-wide returns.
- Dominant shopping destinations (particularly in France), as well as high street retail
pitches (in Sweden and Germany) in thriving commuter
towns.
- Urban logistics will continue to offer relatively high yields whilst underlying land values are expected to increase as
populations and the urban fabric expands.
- Residential developments in the Netherlands and Germany
are favoured as a develop-to-hold strategy whilst avoiding any planning risk.
At a global level, this year's ISA recommends that, over the long term, investors should look to balance ultiple risk-return
strategies in a broad-based international real estate investment portfolio which can run in parallel with a larger, domestic
programme. It also recommends reducing portfolios of non-strategic assets, reducing leverage, and being aware of liquidity needs
if and when credit tightens. However, among the shorter-term opportunities, investors should consider taking leasing risk where
markets are growing, pursuing development in supply-constrained markets where demand is strong, and bidding on strategic
long-hold assets which are most likely to be able to withstand a downturn.
Jacques Gordon, Global Head of Research and Strategy at LaSalle, said: "As we look to
the year ahead, across the G-7 a shift to more expansionary fiscal policy and away from reliance on monetary policy, along with
the potential for protectionist trade policies, could accelerate the end of the "triple low" regime (economic growth, inflation,
and interest rate). These factors are all likely to be at work in the US economy during the next three years. These same policies
could possibly push the UK to higher rates.
"Investing solely in domestic markets greatly reduces the number of potentially rewarding opportunities to take advantage of
in the next two years. The winds of change will be blowing through the world economy in 2017. Headwinds and tailwinds can both be
expected, along with market turbulence. "
About LaSalle Investment Management
LaSalle Investment Management is one of the world's leading real estate investment managers with approximately
$60 billion of private and public equity and private debt investments under management (as of Q3
2016). LaSalle's diverse client base includes public and private pension funds, insurance companies, governments, corporations,
endowments and private individuals from across the globe. LaSalle sponsors a complete range of investment vehicles including
separate accounts, open- and closed-end funds, public securities and entity-level investments. LaSalle is a
wholly-owned, operationally independent subsidiary of Jones Lang LaSalle Inc. (NYSE: JLL), one of the world's largest
real estate companies. For more information please visit www.lasalle.com
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