Advisers ride the wave of real estate investment
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Advisers ride the wave of real estate investment

As real estate establishes itself as an asset class of choice for investors large and small, advisers are reaping the benefits. The next product in the production line could be property derivatives.

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DESPITE THE RECENT rebound in equity markets, with the Eurotop 300 index returning 18% to investors between June 2004 and June 2005, investors are itching to increase their exposure to property. Why is property investment at an all-time high and how are competing retail and institutional investors accessing the market?

Luca Giangolini, a partner in the capital markets group of global property advisory firm Cushman & Wakefield, Healey and Baker, says: "When the stock market dropped to 3,000 points after the dotcom bubble burst, there was a move away from equities to direct investment in property. Pension funds also looked to property for its bond-like attributes such as upward-only leases in the UK."

The burgeoning property investment market has also been driven by the low cost of debt. Although yields are compressing they remain above the medium-term borrowing rates and this is highly attractive to investors, not least to high-net-worth individuals.

The total amount of private debt outstanding to commercial real estate was in the region of £153 billion ($275 billion) at the end of the first quarter of the year, up 13% on the previous year, according to the latest research by DTZ.

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