ING: ‘Back to basics’ investing

Core markets are once again the strategy of choice for investors in the wake of the credit crisis.

Real estate is going “back to basics,” according to real estate investment firm ING Clarion today, as they highlighted the outlook for US commercial real estate in light of the subprime mortgage crisis.

David Lynn, managing director and head of research and investment strategy at ING Clarion Partners, said the real estate industry had entered a new world, where the emphasis was about “how you manage your properties.” There was a “re-emphasis on quality,” he added at a press conference to unveil the report, with investors increasingly moving towards assets in core markets and away from secondary and tertiary markets.

He was joined by ING chairman and chief executive Stephen Furnary who said real estate fundamentals were still solid, and that although the US was “clearly in an economic downturn…the evidence of that economic downturn in the real estate space has really not been felt yet.”

ING’s Real Estate Investment: Finding Value in a Changing Market report, as first reported yesterday on PERE, forecast “substantial” headwinds for the US office sector over the next two years before a strong recovery by 2010 to 2011. The report also highlighted the outlook for the multifamily, industrial, retail and hotel sectors. It argued the rental multifamily and industrial markets would benefit from tightened lending practices and expanding global trade, while the retail sector would be weak in the short-term. The hotel sector was also at risk of a recession although upscale and luxury developments were expected to out perform other segments of the industry over the next three years. 

At the press conference, ING said equity capital was still being raised – albeit at a lower rate – although it was not being deployed. Capital was going towards “niche strategies,” said Bill Krauch, ING managing director and head of global marketing, including distressed and opportunity funds as well as residential land.

The New York-based real estate investment firm said it expected the economy to pick up at end of this year, with real estate investments picking up towards the middle of 2009. “We’re looking toward an upturn at the end of the year and then an acceleration into 2009,” Lynn said.