Real Estate and Globalisation

Dr Richard Barkham MRICS, Group Research Director, Grosvenor, and a Director of Grosvenor Fund Management, heads a global research team of ten full time real estate economists. He has an extensive track record of highly cited real estate research and is a regular presenter at major conferences on real estate trends.

Foreword xi Preface xiii Acknowledgements xv 1. Introduction 1 A remarkable decade for real estate 1 Based on a flawed global economic model 12 The real estate research agenda 17 Background to this book 18 2. Macro-economics and real estate 21 Impact of the recession on US property markets evidence so far (November 2001) 24 State of global property going into 2004 (January 2004) 26 Is the global recovery running out of steam? (November 2004) 28 The outlook for private business investment in 2010 (January 2010) 31 Are we heading towards global deflation? (December 2001) 34 Deflationary conditions may be already present in parts of the West (October 2002) 35 Are buoyant asset markets enough to stimulate recovery? (March 2010) 37 Has the global economy passed its worst? (July 2001) 40 How will rising interest rates impact real estate markets? (January 2011) 43 Is the USA really in recovery? (December 2002) 45 Investment could lead the recovery but not yet (July 2003) 48 UK savings rates have recovered, but the USA still looks out of balance (September 2002) 49 How to save the world: by not saving (December 2009) 51 Events to watch is OPEC about to set off a second oil crisis? (October 2000) 54 How is this oil shock different from the 1970s? (October 2005) 56 Global financial markets remaining challenges to a sustained recovery (August 2010) 58 The Euro finally arrives but will that make much of a difference? (January 2002) 61 Germany (April 2002) 62 Germany s economic situation (April 2003) 64 3. Real estate and recessions 67 An overheated housing market may cloud the Spanish economic landscape? (November 2006) 69 When will the US housing market turn? (January 2009) 72 The sub-prime storm impact on Europe (October 2007) 75 A year on: the sub-prime crisis from a Spanish perspective (August 2008) 78 Global headwinds US real estate debt (February 2010) 81 How close are we to a new 'Great Depression'? (October 2008) 83 Printing money will it work? (April 2009) 86 Are recessions bad for real estate? (February 2008) 89 4. Inflation and real estate 93 Does property provide a hedge against inflation? (September 2009) 96 Linking rents to construction cost inflation the French case (March 2008) 98 Oil prices, inflation and real estate (July 2008) 101 Is inflation building up in the world economy? (June 2010) 104 Can oil prices cause a global inflation problem? (June 2004) 107 Are food prices driving inflation up? (December 2007) 108 Real wages and real estate in the UK (February 2011) 111 5. Retailing and retail property 115 Splitting retail property into food and non-food can increase portfolio performance (November 2003) 118 A prosperous future for UK shopping places? (December 2006) 120 Examining European retail rents (January 2006) 123 Perspective on international retail (October 2001) 126 Consumer confidence and consumer spending (June 2003) 129 The outlook for UK retail (August 2009) 130 USA retail outlook (August 2004) 133 What will an end to the run-up in house prices mean for consumer spending? (April 2005) 135 Retail fundamentals (January 2003) 139 US retailing in recession (May 2009) 141 Luxury retailing in Europe (June 2007) 143 State of health in the retail market in continental Europe (October 2009) 146 6. Property companies and REITs 149 Small investors should wait for the REIT moment to invest in property securities! (January 2007) 151 Listed real estate in a 'perfect storm' the case of Spain (November 2008) 154 Beta and the cost of capital to the UK property sector (May 2008) 157 7. Real estate and construction 161 What factors determine construction costs? (March 2006) 163 Is there a global construction boom? (April 2007) 165 UK construction costs and the recession (March 2006) 167 8. Asia 173 China/WTO (January 2002) 176 Chinese currency reform (December 2004) 178 What s the outlook for the Chinese economy? (June 2009) 179 Will China s problematic inflation subside? (June 2008) 182 Is real estate in China heading for a hard landing? (March 2011) 184 What s happening to Japan? (March 2004) 188 Japan capital values (September 2004) 190 Bank of Japan ends quantitative easing the impact on property will be neutral (April 2006) 193 The growing significance of Asia-Pacific real estate (November 2007) 195 9. Real Estate Returns 199 Do investors care about the standard deviation of property investment returns? (July 2009) 201 Returns and capitalisation rates in US real estate (August 2006) 203 The economics of global property returns (May 2007) 207 Does gearing work? (October 2010) 210 10. Residential real estate 213 The potential for investment in European residential property property (September 2007) 216 Investment opportunities in US housing (July 2010) 219 Trends in owner-occupied residential prices and not always a guide to value trends in the investment sector (August 2003) 221 How important is confidence in the Asian luxury residential market? (October 2002) 224 Luxury residential the tale of three cities (September 2005) 225 What drives Prime Central London residential prices? (September 2006) 227 US home prices looking more exposed (August 2005) 230 Why do commentators continue to talk of a UK housing crash that never seems to come? (June 2002) 231 Australian residential outlook as safe as houses? (December 2010) 233 Australian residential prices city trends drive performance (October 2006) 236 11. Yields 241 How far can yields move out? (January 2008) 244 Bond yields, real estate markets and globalisation (May 2010) 247 Cross-country determinants of investment yields (March 2005) 250 How does the risk of rising interest rates affect property yields and expectations for property performance? (February 2006) 252 Can movements in corporate bond yields tell us anything about movements in property yields? (December 2005) 255 Capital flows to emerging markets (May 2006) 257 Real estate investment yields bouncing up or down? (January 2005) 260 Signs of change in the investment market? (January 2003) 262 Lease flexibility and income security in international property markets (February 2004) 264 Impact of tighter regulations on bank lending (November 2009) 266 Appendix: Modelling Global Real Estate Yields (November 2008) 270 12. Global office markets 297 Just how rewarding is office sector investment? (February 2003) 300 Supply-constrained office markets do deliver stronger rental growth but not always (January 2004) 302 Europe s largest office markets are set to lead the recovery (April 2004) 303 Supply risk in international office markets (June 2005) 307 Office markets and the global economy (April 2008) 307 Can local office markets buck international market trends? (July 2003) 311 Euro zone convergence economic myth and property reality (June 2006) 312 Convergence continued the US case (July 2006) 314 Does income inequality affect office rents? (November 2005) 318 13. Looking forward 321 The case for increased pension fund allocation to real estate (September 2010) 331 Index 335