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Economic Situation 'Will Alter Real Estate Investment Strategies'

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Economic Situation 'Will Alter Real Estate Investment Strategies'

By - Tuesday 04 October 2011

Real estate investors are likely to take one of three approaches to purchasing property given the current worldwide economic problems, CB Richard Ellis (CBRE) has asserted. In the firm's Global Viewpoint for September, it stated that there are three main trends that have already emerged in the sector and these are expected to become more pronounced and last for longer than previously anticipated.

First among them is the appetite for super-prime properties, which have become a target for risk-averse investors due to their ability to retain wealth even during economic downturns. CBRE noted that such assets typically recover before others, while the lack of supply of this kind of real estate means transactions will continue to take place among those looking to preserve their wealth.

Meanwhile, long-term investors who use their real estate portfolios to generate a regular income will gravitate towards prime and good secondary assets, with the organisation noting that the "fundamental re-lettability" of the property in question will be a key factor in determining whether or not to invest. Among the best options for this class of investor are "multi-family housing, retail that caters to everyday rather than discretionary spending and low-risk mezzanine debt".

Finally, those looking for high returns for their money are likely to concentrate on buying distressed assets to capitalise on price rises as economies recover. CBRE noted that another option is to look for areas of economic growth, but suggested that the former strategy is likely to be more effective given the current situation around the world.

DTZ recently revised downwards the amount of capital available for investment in global real estate markets, commenting that funds are concentrating more on "putting existing commitments to work" than they are on raising equity. However, the firm predicted that there will be greater volumes of cross-border investment activity next year, particularly in the Asia-Pacific region, as investors look for suitable - and available - capital targets.

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