EUROPE – The German real estate arm of Skandinaviska Enskilda Banken says it sees “strong investor interest” in the real estate markets of countries that are set to join the European Union.
“We believe there will be strong investor interest in the new EU accession countries and certain Scandinavian countries,” Frankfurt-based SEB Immobilien-Investment said.
It added that the overall European leasing market continues to be weak, although it is improving. The group said it closed 2003 with a leasing ratio of 96.98%. “Office yields will probably remain stable, with continued strong investor interest in retail.”
“The US markets remain weak,” it added, “but could offer interesting opportunities for long-term German funds, due to the yield differential.” SEB’s strategy is to have 50% of its exposure in Germany and 50% in international markets
Meanwhile, Merrill Lynch Investment Managers has released a report arguing that real estate is “still under-represented in UK pension fund investment strategies”.
“MLIM considers that pension funds and other long-term investors should allocate 10-15% of total assets or 20% of the equity portion to diversified UK property unless they have major liquidity or liability constraints.”
It said that such investors currently have much lower allocations to property, usually in the low single digits.
MLIM’s says real estate can be a ‘third way’ asset class, attractive in that it generates returns mid-way between equities and bonds alongside diversification.
“More than ever pension funds need to find true diversification,” said Robert Hayes, head of MLIM’s strategic advice service. “Our latest analysis underlines property’s power as a diversifier. To this must be added the value of a steady high income stream and, particularly in these uncertain times, property’s quality as a hedge against inflation and partial hedge against deflation.”
Separately, MLIM has announced that it has hired Nigel Ridge in its UK specialist team as institutional fund manager. He was previously head of UK retail funds at Legal & General.