The recent era of exceptional real estate returns fuelled by low cost and readily available debt came to an end in 2007. Some investors will choose to wait until the economic and capital market outlook becomes clearer, before committing further capital to the sector. Yet, although the medium-term and long-term outlook is for lower returns than in the recent past, it is still at a level of return and risk that will be attractive compared to other asset classes.

With the global economy set to slow from its very rapid growth rates of the last few years, commercial real estate market fundamentals should remain sound, provided slower growth in the US in particular does not become a recession. Growth in demand for commercial real estate may weaken, but it should remain suffi cient to absorb the muted levels of new construction in the pipeline and to help underpin rental growth. However, the risks to the outlook clearly are asymmetric on the downside.

After an extended boom around much of the world in residential markets the focus will be on the outlook for housing affordability. Owner occupier demand is likely to remain or become markedly more subdued in many parts of the developed world. It is likely to continue at high levels in many emerging markets, particularly in China, India and Latin America. Globally, the divide between markets with strong demographic and economic underpinnings and those without will become much sharper in 2008 for both owner occupied housing and for rented accommodation.

The regional and local real estate market outlook is more varied than in recent years. As a result global, regional and local diversifi cation will provide clear benefi ts to investors.  Some investors will choose to adjust strategies to reduce risk. Other investors will choose to increase risk to maintain levels of return.

At a time of capital market uncertainty, the scope for mispricing of assets or simply for investors to hold markedly different views on the appropriate pricing of real estate assets is increased. One implication is likely to be a reduced volume of real estate transactions. Another is that the opportunity to arbritrage between public and private real estate pricing has increased.

2008 marks the start of a more challenging era for real estate. A fi ve year period of exceptional returns is drawing to a close. Over the medium-term we expect real estate to deliver a level of return between that of equities and bonds at a level of risk that will also lie between equities and bonds. (Executive Summary)

Download Global Vision 2008, ING Real Estate

PDF format, 1.28MB, 31Pages.

Contents
Real Estate Investment: Dawn of a New Era
Executive Summary
Real Estate in 2008: The End of the Debt Driven Era
Global Economic Outlook: Probably a Mild Slowdown
Safe as Houses?
It’s a Matter of Interest
Divergent Trends in the Regional Economic Outlook
Real Estate Capital Markets—Uncertain Times
Public Debt
Private Debt
Public Equity
Private Equity
Real Estate Capital Flows
Real Estate Performance: 2007—The Last Exceptional Year
The Global Real Estate Outlook: Diversity Is Increasing
Retail Sector
Industrial Sector
Office Sector
Residential Sector
Alternatives
Risks to the Outlook: Recession, Infl ation or Both?
Conclusions: Dawn of a New Era

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ING Real Estate is an integrated group that is engaged in the development, finance and investment management of quality real estate in the world’s major markets. With a total portfolio exceeding EUR 100 billion, we rank among the leading global real estate companies, serving a broad client base from our offices across Europe, North America, Australia and Asia.

We are able to combine local market knowledge with global experience to offer our clients comprehensive solutions for their real estate development, financing and investment management needs. Our client focus, global research capability and highly disciplined processes are the key to our sustained investment performance.

Our dedicated staff of over 2,500 – located in offices in 21 countries – serve our broad client base, which includes individuals, medium-sized businesses, large corporations and institutions.

Our mission is simply to be the leading provider of innovative real estate-based solutions that exceed our clients’ expectations.

ING Real Estate is part of ING Group, a global financial services institution which provides banking, investments, life insurance and retirement services to over 75 million private, corporate and institutional clients in more than 50 countries.

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