Austrian, German and Swedish industrial real estate sectors offer high risk-adjusted returns, according to Aviva Investors
24 April 2012
(London): According to analysis released today by Aviva Investors, risk-adjusted returns over the investment period from 2012 - 2016 are expected to be highest in the Swedish retail and industrial real estate sectors and the industrial sectors in Germany and Austria.
The Aviva Investors Macro and Property (MaP) Risk Ratings, designed to assess the relative attractiveness of UK and European commercial real estate and made public for the first time, also showed that macro risks in these regions have been identified as the lowest. In fact, according to the Macro Risk Rating Map, Sweden demonstrates the greatest relative economic strength across the UK and Europe.
In Spain and Italy macro risks are relatively high and risk-adjusted returns are expected to be low in the retail and office sectors as a result of a prolonged weakness in demand for commercial space. In addition, the Spanish, Hungarian and Irish commercial real estate markets carry the highest property risks.
Chris Urwin, Global Research Manager for Aviva Investors, commented:
“With continued disruption to economies and markets across the globe, understanding the variety of risks that can impact an investment portfolio has become more important than ever. As a result, we developed risk ratings to provide investors with more detailed guidance on the nature and risks associated with commercial real estate. Hopefully they will go some way in helping increase awareness of the risks associated with certain geographies and sectors.”
The MaP Risk Ratings have been developed by Aviva Investors’ real estate strategy and research team. Based on a medium to long term investment period of 2012-16, they take both macro-economic (Macro Risk Rating Map) and property risks (Property Risk Rating Map) into account and are calculated by combining a variety of data with Aviva Investors’ own return forecasts.
Macro Risk Ratings:
Property Risk Ratings:
Chris Urwin concluded:
“As a result of what is happening across the Eurozone, capital growth is expected to be slightly negative in most markets. It’s not surprising to see that this has resulted in the higher yielding industrial markets offering higher potential total returns than other sectors making them a relatively attractive investment. At a country level, our belief is that the Nordic countries and Germany also offer a compelling investment case. We currently view them as safe havens and investors can benefit from having an exposure to prime real estate that provides secure income streams. While not cheap by historic standards, we think these markets continue to offer relatively good value on a risk-adjusted basis.“
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Notes to Editors
The MaP Risk Ratings will be updated twice a year and made available to clients for information purposes only. The information and opinions contained in this document are for use by the financial press and media only. Opinions expressed are those of Aviva Investors Global Services Limited. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Investment markets and conditions can change rapidly and as such the views expressed should not be taken as statements of fact or advice nor should reliance be placed on these views when making investment decisions.
The Macro Risk Rating assigns a rating to each country based on the strength of its economy, its public sector finances, the strength of its financial sector and its ability to withstand a shock. For each country, 19 indicators of economic risk are combined to give a single Macro Risk Rating. A positive rating indicates relative economic strength, a negative rating suggests greater vulnerability to external or macro shocks.
The Property Risk Rating analyses each country and each commercial property sector according to the liquidity and transparency of the market, the volatility of returns over time and the leverage employed. The ratings for each variable are combined to give a single property-risk rating. We have not included Greece and Portugal in this rating as we do not have an active interest in either country.
The ratings are combined with Aviva Investors’ forecasts for total returns over five years, providing investors with a snapshot of the relative attractiveness of commercial property sectors across Europe over the medium to long term. The full results as at the end of February 2012 are as follows; for further information please contact us on the details below.
The information and opinions contained in this document are for use by the financial press and media only. Investment markets and conditions can change rapidly and as such the views expressed should not be taken as statements of fact or advice nor should reliance be placed on these views when making investment decisions. Past performance is not a guide to the future.
Aviva Investors is the global asset management business of Aviva plc. The business delivers investment management solutions, services and client-driven performance to clients worldwide. Aviva Investors operates in 17 countries in Asia Pacific, Europe, North America and the United Kingdom with assets under management of £263 billion at 31 December 2011.
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