The commercial property
Website

Prime Commercial Real Estate Back in Favour with Sovereign Wealth Fund Managers

Posted on 7 August, 2012 by Jodee Redmond

In the wake of the US subprime collapse, real estate was not viewed as a favourable place for investors, but this view has started to shift as sovereign wealth, pension, and insurance funds managers are investment vehicles which can offer a better rate of return than government bonds.

Sovereign wealth funds alone are a $4 trillion business and pension funds account for another $30 trillion in holdings. If even a small percentage of these funds were invested in commercial real estate, it would represent a huge influx of new money available to this sector.

Low-interest rates on these “safe” investment choices are leading managers to consider others options and first-rate commercial properties located anywhere from London to Bangkok are currently in demand. Sovereign wealth funds are getting positive yields of between five and seven per cent in commercial real estate, which makes this a very attractive investment. They are able to get capital appreciation as well as a yield on their purchase.

In a recent high-end commercial real estate deal, a Norwegian sovereign wealth fund teamed up with Assicurazioni Generali, an Italian insurance company, to manage retail and office properties in central Paris. The cash value of the commercial properties the companies involved is 550 million euros.

Real estate stocks and investment trusts are another way for investors to get into the market. According to Thomson Reuters DataStream, dividend yields for stocks listed on the MSCI real estate index for the euro zone reach close to seven per cent. This figure is far more impressive than the negative or close-to-zero returns investors can expect from government bonds at present.

The best properties for commercial investors are ones in sought-after areas which are occupied by financially-solid tenants who committed to a long-term lease. Anything less is not going to pass muster for fund managers who are looking for investments offering a similar level of security as bonds but with the potential for better yields.




Leave a Reply


Recent Posts

Growth-in-UK-Commercial-Property-Values-continues-in-March

Growth in UK Commercial Property Values continues in March

Debenhams-Profits-fall-by-25-Per-Cent

Debenhams Profits fall by 25 Per Cent

Historic-Coronation-Street-Studio-to-become-Creative-Media-Hub

Historic Coronation Street Studio to become Creative Media Hub

New-Type-of-Lender-enters-the-Commercial-Property-Market

New Type of Lender enters the Commercial Property Market

Death-Threats-force-Lagan-to-pull-out-of-Aventas-Deal

“Death Threats” force Lagan to pull out of Aventas Deal

Consumers-buying-Discount-to-save-for-Luxury-Goods

Consumers buying Discount to save for Luxury Items

Sanpower-purchases-controlling-share-in-House-of-Fraser

Sanpower purchases Controlling Share in House of Fraser

Administrators-put-Spinningfields-Office-Blocks-on-the-Market

Administrators put Spinningfields Office Blocks on the Market

Global-Commercial-Property-Transactions-forecast-to-rise-by-15-per-cent

Global Commercial Property Transactions forecast to rise by 15 per cent

UKs-first-Branchless-Bank-seeks-North-East-HQ

UK’s first Branchless Bank seeks North East HQ

Forecasters-see-continued-US-Market-Growth

Forecasters see continued US Market Growth

Spanish-Commercial-Property-Market-Recovers-Slightly

Spanish Commercial Property Market Recovers Slightly

Midland-LEPs-ask-for-£148m-in-Government-Cash

Midland LEPs ask for £148m in Government Cash

Swindon-Speculative-Build-First-Since-Recession

Swindon Speculative Build First Since Recession

Marks-and-Spencer-reports-further-Fall-in-Non-Food-Sales

Marks and Spencer reports further Fall in Non-Food Sales

Second-Cash-Injection-for-Sheffield-Steelworks-Regeneration-Scheme

Second Cash Injection for Sheffield Steelworks Regeneration Scheme