UK - Investors need to be cautious about which real estate sectors they invest in, Struan Robertson of investment bank Morgan Stanley told a property conference in London, organised by the group.

From an equity prospective the market was at an ‘inflection point’, he reckoned. “We believe we have reached the end of the bear market, but that does not mean the beginning of a bull market.”

Robertson said the next three to five years could be very volatile in trading and very range bound. “This created challenges at the property level and for those investing in property vehicles. We need to be very careful about the sectors.”

Improvements in earnings could result in positive impacts with some consequent short-term upside. “So we have to be very thoughtful about what sectors we are in, as this is not the ‘rising tide’ environment of the 1990s,” he pointed out.

On the purely economic side, the fall in corporate investment would impact on the office sector, rather than the retail side, which looked like being more robust. “An additional upside for this sector comes from the interest rate environment.”

But there are risks that needed to be considered. “These are asymmetric risks. On the one hand there could be a cyclical rebound, which would be favourable to all of us. But then there is the ‘D’ word – structural deflation.”

He pointed to Japan and perhaps Germany and said that these risks need to be considered “in any of our decisions going forward”.