Value opportunities for real estate in Asia-Pac cities and beyond

MANY investors are starting to realise that most developed countries seem to be caught in a low growth, low inflationary and low interest rates world. Though the US Federal Reserve has started to normalise interest rates since end-2015, it has recently backpedalled from further rate hikes. Other major central banks have kept policy rates around their all-time lows and are still awaiting further economic improvements to start to normalise interest rates.

This environment of low interest rates creates on the one hand challenges for investors to deploy money in financial markets, as higher return opportunities are hard to find. On the other hand, active real estate strategies can thrive under such circumstances and should play a more prominent role in investment portfolios.

Real-estate strategies can be broken down into three categories - core, value-added and opportunistic. Core strategies are relatively low risk, with returns mainly being generated by long-term leases. Opportunistic strategies are high-risk investments with the extensive use of leverage or taking development risk and they have higher uncertainty on returns.