Real Estate Private Debt: Time to Act?

Has commercial real estate reached its inflection point? With little transaction activity, price and index data are generated with a lag. Market prices can change much more rapidly than they can be aggregated and reported. Investors must rely on fundamental analysis and experience more than data to time the recovery.

Real estate is not limited to a single type of financial products. It runs the gamut from listed equities such as REITs, and listed debt, to absolute return products such as some limited partnerships and direct ownership of properties.

In Europe, banks had been a major source of funding. As North American markets did a decade ago, the European commercial property market is expanding and seeking to tap additional debt funding sources. At the same time, banks are increasingly shy, as new regulatory reserve requirements make real estate lending relatively less attractive for them. Demand up, supply down – in classic economics, that should mean a higher price. In addition to supply-and-demand-driven yield enhancement, rates are generally higher than in recent years.

Worth a thought?  

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Simon Martin - Fabrice Sauzeau
Senior Partner, Chief Investment Strategist, and Head of Research, Tristan Capital Management - Deputy Head of Pension and Insurance Relations, Candriam
US indices can provide insights into performance in Europe.
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