Super funds are continuing to ramp up their exposure to global property, with a particular focus on the retail sector, says TIAA Henderson Real Estate.
According to new research by the $33.7 billion property investment firm, the European market presents significant opportunities for Australian investors.
TIAA Henderson Real Estate executive director and head of Australia, Nick Evans, said that Australian investors are showing an “increased appetite” for global property.
In particular, investors are being drawn to retail property due to long lease terms and low volatility, he said.
"While a range of opportunities exist across international markets, on the ground expertise is essential to ensuring any investment delivers the appropriate returns,” he said.
Mr Evans argued that investors must adopt a “tailored investment approach” when looking to invest in global real estate.
TIAA Henderson Real Estate global co-head of research Alice Breheny contended that investors should adopt a “city-based” investment strategy.
“A city-based real estate strategy, underpinned by long-term, structural trends - that strikes the right balance of risk and diversification, while taking advantage of short-term pricing opportunities - will be best positioned for above-average portfolio level returns, lower-than-average volatility and modest downside risk for long-term investors," Ms Breheny said.
“Challenging market conditions and evolving investor requirements mean we are increasingly looking at longer-term drivers of real estate performance.”
Research found that London will be the largest European retail market by 2030, with Basel the most productive city in terms of GDP per capita, followed by Geneva, Oslo, Zurich and Stockholm.
Istanbul will be the fastest growing city in terms of GDP growth between 2010 and 2030.
TIAA Henderson Real Estate scored over 200 European cities against economic and environmental fundamentals, in addition to a global risk model, in order to identify cities that are “future proof” for investors.
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