When it comes to investing, it’s all relative. As we explore elsewhere in The Wealth Report, one upshot of the extension of the global economic cycle is a lowering of returns across all investment classes. In this context, real estate yields will continue to look attractive: typically, even the lowest are higher than government bond yields, and volatility is lower than that of stocks. There is a strong case to be made for real estate investment at this point in the cycle.
Some investors, however, want to go a step further by pursuing strategies that enhance real estate returns in an absolute sense. There are many ways to boost performance, but two of the most relevant fall under the banner of reinvention.
At the level of individual assets, real estate offers a unique opportunity for redevelopment, repositioning and enhancement. As various parts of the sector experience structural shifts, some investors are creating value by changing the way assets are used to make them more relevant to today’s market: for example, turning an outdated shopping centre into residential or office space.
Broader in nature, a second type of reinvention sees entire neighbourhoods take on new life, sparked by a certain intangible mix of conditions. Investing in these locations at the right time can mean riding a wave of value appreciation that is almost unrelated to the swings of broader market conditions.
Identifying such opportunities is challenging, and almost impossible without the help of local market experts. For this reason, we have worked with our colleagues around the world – from Madrid to Moscow, and from Kampala to Kuala Lumpur – to draw up a list of those micro-locations that we believe warrant further investigation by investors seeking to maximise their real estate returns. Here we present a small selection of these markets-
- Building Blocks: Rue Saint-Honoré, Paris, France
- Building Blocks: Madrid Nuevo Norte, Madrid, Spain
- Building Blocks: North Sydney, Sydney, Australia
- Building Blocks: Khamovniki, Moscow, Russia
- Building Blocks: Tun Razak Exchange, Kuala Lumpur, Malaysia
- Building Blocks: Wadala Truck Terminus, Mumbai, India
- Building Blocks: Kololo, Kampala, Uganda