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Will 2016 be "2015 lite" with the potential of a twist?

Research

We believe global real estate will prove an attractive investment in 2016 relative to other asset classes, delivering solid, albeit not spectacular returns. In Europe, these could equate to c.5-8% on core, liquid products in established markets.

Despite headwinds, from a risk-adjusted view, real estate remains very appealing. Whilst we may see slightly lower returns in 2016 than the previous year, we believe returns will remain stable and we will see outperformance in certain sectors.

Our research highlights the retail warehouse/outlet mall, logistics, and expanding ‘structural funds’ like PRS, as sectors which could perform particularly well from a European perspective in 2016. Globally, we favour a regional cities approach, based on their growth prospects and a minimum of occupier and investment market liquidity. With the latter condition more easily met for retail assets than in the office and logistics sector.

There are risks to the real estate market going into 2016, both economic and geopolitical, but none of these concerns are new. 2015 was equally uncertain and volatile but performance remained steady, as investors sought yield in a low inflation environment. We would expect a similar focus for 2016, but with the added benefit of an improvement in occupier demand. What we do feel is important, is that investors have a clear appreciation of where real estate is at in the cycle from a pricing perspective.

Disclaimer Issued by Henderson Real Estate Asset Management Limited, 201 Bishopsgate, EC2M 3BN. Authorised and regulated by the Financial Conduct Authority. TH Real Estate is a name under which Henderson Real Estate Asset Management Limited provides investment products and services.

Michael Keogh

Mike Keogh

Director of Research

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