Investors battle low-yield environment
EXPO REAL 2016: Investors should focus on asset locations and rent potential as “prices are out of control”, a panel at Expo Real heard today.
In a discussion about working through a low-yield environment, Stefan Ziegler, chief operating officer of KGAL, said: “Prices are out of control to a certain extent so what you have to do is protect your investors by buying assets where you have a rent level that you can achieve even in a crisis.
“What we’re doing now is buying location and buying decent rents. It’s crisis protection mode.”
EXPO REAL 2016: Investors should focus on asset locations and rent potential as “prices are out of control”, a panel at Expo Real heard today.
In a discussion about working through a low-yield environment, Stefan Ziegler, chief operating officer of KGAL, said: “Prices are out of control to a certain extent so what you have to do is protect your investors by buying assets where you have a rent level that you can achieve even in a crisis.
“What we’re doing now is buying location and buying decent rents. It’s crisis protection mode.”
The comments followed a presentation by Tom Leahy, director of market analysis at Real Capital Analytics, where he showed that yields had fallen across Europe since 2014.
Yields in London had seen the biggest fall in that period, plummeting to under 5%.
Annette Kroger, chief executive of Allianz Real Estate Germany, said that her company’s strategy in a low-yield environment is balancing the portfolio between core and value-add assets.
She said: “It’s about having a combination of core, where you see some growth potential in the market and diversifying it with other products where you see a bit more yield.”
Kroger added that with interest rates at record lows, real estate offers attractive yields, putting the sector at the heart of the insurance company’s strategy despite rising prices.
The panel agreed that the low-yield environment is unlikely to change in the foreseeable future although none of the speakers wanted to call it “the new normal”.
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