Partners: More opportunity outside the US

Partners Group is finding few compelling real estate investments in the US and more in Europe and Asia, the firm said in its twice-yearly research report.

The Zug, Switzerland-based multi-manager wrote that pricing and competition for US real estate has made investments less compelling than assets in Europe or Asia. Likewise, core real estate globally and particularly in the US is the least-attractive strategy, the firm said in its 2016 Private Markets Navigator, a report released Monday.

However, there are pockets of opportunity, Partners Group wrote, citing multifamily residential and office properties in the US as good prospects. Assets located in areas with high employment growth, specifically technology hubs and places with low home ownership rates, will perform well, the firm predicted. Partners Group noted that San Francisco illustrates the intersection of these trends. In the tech-dependent city, apartment rent has soared 57 percent over five years and housing undersupply has led renters to nearby Oakland, where rents have increased 88 percent.

Outside of tech-heavy San Francisco, Portland, Seattle and their satellite towns, though, Partners Group is looking to Europe and Asia for investment potential. Applying the same focused thesis as in the Americas, the firm cautioned against buying across asset classes and continents. Rather, opportunities exist in more focused areas, such as major regional warehouse development in Europe with connections to a network of smaller local distribution centers and real estate located close to major transport infrastructure projects. Within specific geographies, Partners Group picked out the UK, Nordic countries and Germany as better bets, and Berlin in particular for good yields and fundamentals.

In Asia, Partners Group interpreted slow economic growth as “challenging,” recommending specific sectors of the property markets within individual countries. For example, Australia marks the strongest bet for value-add and opportunistic performance out of any country worldwide, thanks to a need for modern distribution facilities. Likewise in Singapore, the firm highlighted industrial real estate because of the opportunity to reposition properties and the ability to take advantage of government measures supporting development in that sector. Finally, increasing intraregional tourism to Japan and Korea leads to the potential for strong returns from acquiring undermanaged hotels.