The market is not heading for a crash and the global outlook remains solid despite the credit crunch, according to the latest research from LaSalle Investment Management.
Report co-author Robin Goodchild, LaSalle’s head of European research and strategy, said: ‘We do not believe that markets are heading for an early 1990s-style hard landing as there is little risk of over supply; however, the recovery opportunity is not likely to be as compelling as 1993/94 either.
‘There is no shortage of capital available to invest in real estate, as allocations continue to be increased and funds have unspent equity, so prices are not likely to fall significantly.’
Europe
The report found that the crunch has started to hit financial centres like London and Frankfurt.
The UK markets experienced the most yield compression prior to the credit crunch, although this has already begun to reverse, which will dampen short-term returns significantly.
The rest of Europe is less vulnerable, according to LaSalle, as the cost of euro debt is much lower than for pound sterling debt.
Asia Pacific
LaSalle predicts that economic growth will remain strong throughout the region, with strong demand from occupiers and only modest levels of new supply in the near term.
Uncertainties in the global debt markets will have an effect, although there remains a plentiful supply of debt and equity throughout the region.
Americas
Whilst a full blown recession is unlikely, the probability of a ‘severe slowdown’ has arisen.
However, LaSalle predicts that the real estate capital markets should return to normality by early 2008.
Capital markets in Canada and Mexico have been less affected. Property types which are ‘recession-resistant’ such as healthcare facilities and senior and student housing should prove attractive for investors.
The report is the 14th edition of LaSalle's Investment Strategy Annual.
