GLOBAL - The real estate market is offering great rewards to those who get the timing right, but pension funds tempted to make large allocations to the sector have been warned the market may not yet have bottomed out.
He said the market looked as if it still had some way to fall and therefore the most prudent option was a tranched investment, spread over a longer period, to downplay the worst of the effects.
Scott T. Crowe, senior vice president, global strategist/portfolio manager, Cohen & Steers, said the direct real estate market was trading at a considerable discount to fair value and therefore represented a good buying opportunity for pension funds. "There's definite value there," he said.
Crowe said on a global basis, 2007 saw earnings growth of 9% with the potential for 6-8% growth in 2008-09 plus a dividend yield of 4%, amounting to a possible return of 10-12%.
Lawson Shepherd, director of distribution, Invista Real Estate, agreed the market was undervalued. He said most assets had been trading at 35-40% below net asset values (NAV) for the past six months or so.
"It's trading at a great discount. Interestingly, one of the best performing sectors of the stock market [so far this year] is the property sector - due to opportunist money coming in," he said.
Shepherd said he didn't know when assets would return to NAV. "There's no immediate catalyst [visible] to return to NAV or above, so timing the market is key," he said.
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