Investors who wish to outperform “broad indices” should prioritise US investments, according to Jay Mantz, Morgan Stanley managing director and president and chief investment officer of Morgan Stanley Real Estate Investing.
Mantz, who was keynote speaker on the second day of this year’s PERE Forum: Europe in London, told delegates that the US market had two key elements underpinning his view: “One, it has the best prospects for economic growth than any other developed market in the world, ” he said, “Two, you just need to look at levels of new (development) supply whether it be single family homes or offices – there are supply constraints.” He warned, however, that the US hotel investment market still had some way to go before becoming attractive.
He said: “Europe presents much more attractive recapitalisation opportunities but I don’t think the (national) growth is going to be there.”
Mantz, who was reinstated into his role last year as part of a raft of senior changes at MSREI after two years as global co-head of Morgan Stanley’s merchant banking division, pointed to China and India for investors seeking long-term growth. This was despite the former introducing more onerous regulation lately in its attempt to stem an overheated market.
He said: “Our prediction is that over the next 20 to 30 years, more than 50 percent of the investible real estate universe is going to be in emerging markets so investors looking for global diversification are going to have to develop and implement emerging market strategies”
He estimated there is about $50 billion to $100 billion dry opportunistic capital waiting to be deployed into the real estate sector. “Add to that other separate accounts, commingled funds and REITs as well as other vehicles, we feel there is about $300 billion earmarked for real estate today [overall]. Indeed, that has put a buffer zone on asset [value] correction.” He added that the existence of such an amount of real estate-focussed capital would only serve to add to the level of competition for assets.