What is a property derivative Why the UK may turn to Reits
DESPITE THE RECENT rebound in equity markets, with the Eurotop 300 index returning 18% to investors between June 2004 and June 2005, investors are itching to increase their exposure to property. Why is property investment at an all-time high and how are competing retail and institutional investors accessing the market?
Luca Giangolini, a partner in the capital markets group of global property advisory firm Cushman & Wakefield, Healey and Baker, says: "When the stock market dropped to 3,000 points after the dotcom bubble burst, there was a move away from equities to direct investment in property. Pension funds also looked to property for its bond-like attributes such as upward-only leases in the UK."
The burgeoning property investment market has also been driven by the low cost of debt. Although yields are compressing they remain above the medium-term borrowing rates and this is highly attractive to investors, not least to high-net-worth individuals.
The total amount of private debt outstanding to commercial real estate was in the region of £153 billion ($275 billion) at the end of the first quarter of the year, up 13% on the previous year, according to the latest research by DTZ.