Investors must play defence on property
Commercial real estate has been caught up in a vicious cycle of value destruction as a result of the global financial crisis, and investors must adopt a defensive approach by protecting their income streams and managing their liquidity, according to LaSalle Investment Management’s report on real estate investment strategy for 2009.
Repricing is underway in Australia but it is spreading unevenly across regions and property types. Investors need to work with tenants by quickly adjusting rents to meet the new market reality and fashioning early renewals as part of their defensive strategy.
“We continue to believe that a disciplined investment process and an explicit strategy are the best ways to approach large, complex and chaotic markets. This is especially true during periods of great volatility. Playing a strong defence will be critical to emerging from this period as a winner,” said Robin Goodchild, co-author of the report.
Investors should also prepare themselves to take advantage of capital shortages and repricing when the market settles. A “third wave” of opportunistic investing will take place, and investors should watch out for real estate investment trusts and fund units trading at steep discounts and defaulted land deals in need of recapitalisation.
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