Aviva Investors urges cautious optimism for real estate in 2010
11 January 2010
(London): Aviva Investors, one of the largest managers of real estate in the UK and Europe, today called for investors to take a cautiously optimistic approach to the market in 2010, noting a marked change in real estate sentiment during 2009.
Ian Womack, Global Chief Executive for Real Estate at Aviva Investors said: “There has undoubtedly been a significant turnaround in property market conditions since the start of 2009, when the outlook was unremittingly grim.
Investor groups that were actively selling assets in 2008 have shored up their balance sheets over 2009 and are either no longer selling or actively looking to invest in real estate. REITs fortunes have improved with equity raisings and the rally in their share prices. Property unit trusts are seeing investment inflows again and in the UK, overseas investors have been encouraged by the decline in sterling.
“Institutional investors are seeing the advantage of improved value in commercial real estate in light of the pronounced falls over the past two years, from mid-2007. The improvement in value has, of course, been helped by the marked decline in interest rates with paltry cash returns providing a strong incentive to invest in higher-yielding assets, of which real estate is a strong contender.
“The key question is how long will this rally in values last? Our view is that it has further to run in 2010, barring any further shocks in the wider economic backdrop. In particular we expect the Bank of England to move slowly to tighten monetary policy which will help the rally.
“Key impacts on this will include the ongoing weakness of occupier markets. Rents are falling in most sectors and will not improve whilst the overall economic recovery remains sluggish. There also remains a considerable debt overhang which is likely to lead to an increase in supply of stock on the market. As the year progresses, the supply-demand imbalance which is currently driving prices higher is expected to ease and we expect returns will ease too.
“Globally, the UK is rallying most strongly at the moment. In Europe, Paris has turned around decisively and in Asia, Hong Kong and Singapore are attracting increased investor demand. Even in the US there are tentative signs of market stabilisation. We remain cautious in these markets as all have further to go in terms of rental decline.”
Aviva Investors manages over £21 billion in real estate assets globally (at 30 June 2009).
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Notes to Editors
Aviva Investors is the global asset management business of Aviva plc. The company delivers investment management solutions, services and client-driven performance to clients worldwide. Aviva Investors operates in 15 countries in Asia Pacific, Europe, North America and the United Kingdom.
- Aviva is the world’s fifth largest insurance group*, serving 50 million customers across Europe, North America and Asia Pacific.
- Aviva’s principal business activities are long-term savings, fund management and general insurance, with worldwide total sales of £24.4 billion for the six months to 30 June 2009 and funds under management of £352 billion at 30 June 2009, of which Aviva Investors manages £222 billion.
*Based on gross worldwide premiums for the year ended 31 December 2008
Aviva Investors Global Services Limited
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Email firstname.lastname@example.org Aviva Investors Global Services Limited, registered in England No. 1151805. Registered Office: No. 1 Poultry, London EC2R 8EJ. Authorised and regulated in the UK by the Financial Services Authority and a member of the Investment Management Association.
Contact us at Aviva Investors Global Services Limited, No. 1 Poultry, London EC2R 8EJ. 09/1254
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