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Commercial real estate

Standard Life applies ‘Focus on Change’ philosophy to real estate sector

Standard Life Investments has applied the company’s Focus on Change philosophy to the real estate sector and concluded that because of current pricing and other drivers, allocations to the sector could increase.

In the latest edition of Global Perspective, Standard Life Investments researches the future drivers of and prospects for real estate, concluding that now is a cyclically opportune time to build allocations to the asset class.

This opinion is underpinned by Standard Life Investments’ expectations of high single digit nominal returns over the next three to five years.

Anne Breen, head of real estate research and strategy, Standard Life Investments, says: “Investors are asking if now is a good time to invest in commercial real estate. We believe that the pricing environment has changed and there is now more clarity on the outlook. The argument for sustainable yield from real estate is well founded and investment opportunities are evolving in response to an altered landscape.

“Although 2012 has been a challenging year for the asset class, our analysis suggests that a turning point is imminent. With the pricing relative to both government and corporate bond markets at historically attractive levels, a further trigger is the outlook for economic expansion and tenant activity. Combined with the growing pressure to invest in a shrinking pool of higher yielding assets, and diverse views over the path of inflation, we could very well be entering a period of increasing allocations to real estate.”

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