Global Portfolios Should Contain Public, Private Real Estate
http://www.reit.com Andrew Baum, professor of Land Management at the University of Reading’s Henley Business School and chairman of the investment committee for CBRE Investors’ global multi-manager team, spoke with REIT.com at the European Public Real Estate Association’s annual conference in London in early September about his outlook for the global listed property market. Baum started with his views on the European market.
“It looks like the wind is not going to blow everybody in the right direction,” Baum said. “The big cities, the high-quality assets in Europe are going to perform reasonably well. The peripheral assets are going to lose market share. Unfortunately it is going to be a market where the big get bigger and the small get smaller.”
Baum said as a global real estate investor the markets that truly fascinate him right now are those with strong demographics. He cited Turkey and Iran as two markets with young populations that could hold value.
“Iran is interesting if the political situation changes. A place like Pakistan has this huge, wonderful demographic,” he said. “You see the U.S. surviving with this huge market in Mexico on its doorstep, now Europe has these markets on its own doorstep. And it needs to unlock them sometime, and real estate is an essential first phase of unlocking those markets.”
With uncertain economic conditions still persisting in many parts of the globe, the commercial real estate landscape still faces many challenges. However, Baum said one of the biggest threats would be a scandal in the private real estate market. Baum, who invests in both public and private real estate, said a scandal is more likely to take place in the private market than the listed market. He said that is why it is important that the private real estate sector is as professional and transparent as possible.
Baum said he has changed his view regarding the role listed real estate securities should play in a portfolio alongside direct Real Estate Investments.
“I would have argued five or 10 years ago that listed real estate is volatile, it is correlated with the stock market and its not really real estate,” Baum said. “I’ve really changed my view because the collapse in 2008 showed that private real estate is clearly volatile and is capable of being leveraged even more than listed real estate. I think a wise real estate investor has listed and private in the same portfolio and has to find ways to arbitrage between the two on a continuing basis.”
By Matt Bechard
Duration : 0:3:24
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