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

Belfast-Council-buys-Clarendon-House-at a-Knock-Down-Price

Belfast Council buys Clarendon House at a ‘Knock-Down’ Price

ID:4832230

Stenprop completes Flagship West End acquisition

Buoyant-Construction-Sector-prompts-clutch-of-appointments-at-Helm

Buoyant Construction Sector prompts clutch of appointments at Helm

Strong-Demand-expected-for-Speculative-Kettering-Scheme

Strong Demand expected for Speculative Kettering Scheme

Schroders-reveals-initial-details-of-Manchesters-City-Tower-refurbishment

Schroders reveals initial details of Manchester’s City Tower refurbishment

ID:26269859

Vantec Investment illustrates Ambition of Sunderland’s Automotive Sector

ID:62108681

Savills confirms acquisition of Property Management Firm

Artist-provides-Innovative-Solution-to-Londons-Office-Supply-Shortage

Artist provides Innovative Solution to London’s Office Supply Shortage

Plymouth-Charity-set-to-make-Brooklands-Campus-move

Plymouth Charity set to make Brooklands Campus move

ID:90111875

Booming London Economy drives growth for Great Portland Estates

Indicative designs for 2 and 3 Angel Square

Latest NOMA Office proposals open to Public Consultation

ID:18951095

Strong Leisure Offer boosts Shopping Centre Footfall

DTZ-appoints-EMEA-Property-Management-Technology-Chief

DTZ appoints EMEA Property Management Technology Chief

Oxford-Science-Park-set-for-Next-Phase-of-Development

Oxford Science Park set for Next Phase of Development

ID:41649961

Global Chocolate Café seeks Locations for London debut

ID:73652596

H.I.G Capital completes acquisition of Chester Shopping Centre