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Emerging Trends in Real Estate Europe 2010
by Urban Land Institute & PricewaterhouseCoopers
List Price: $49.95
IREI Monthly Price: $44.96
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The most comprehensive annual forecast available for all types of commercial real estate in Europe, this handbook is based on interviews with leading real estates authorities and addresses European investment trends, capital markets, markets to watch, and the latest developments in the multifamily, retail, office, industrial and hotel sectors. For more information on this title, click here to go to the IREI bookstore.

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Stocks Are Out, Alternatives Are In
Institutional investors are scaling back long-only equity strategies and are ramping up allocations to alternatives, including infrastructure, according to a survey of 349 North American investors from 325 institutions by J.P. Morgan Asset Management.

"Interest is increasing across the spectrum," says Mark Weisdorf, managing director and global CIO, Infrastructure Investment Group, J.P. Morgan Asset Management. "Our survey found that infrastructure is most appealing to public [pension] plans with 18 percent of these plans surveyed currently investing in the asset class and another 20 percent planning to invest in the future."

The J.P. Morgan 2010 Alternative Assets Survey also found that average allocations to infrastructure are expected to grow to 5.7 percent from 4.3 percent during the next two to three years. "That may seem small -- a 1.4 percent increase -- but that is 25 percent more than the total average allocation," Weisdorf explains. "We also found that interest in infrastructure remained steady through the financial crisis. Investors may have put infrastructure on hold and focused resources on managing through the crisis, but once we got through the worst of it, investors started to take action again and commitments picked up."

The Asia Pacific region is the most popular destination for alternatives investors, according to the survey. The West's legacy of credit bubbles and rescue packages is hindering GDP growth in most countries, while economies such as "India and China are expected to grow at rates of 6 percent to 10 percent during the next 10 to 20 years," says Weisdorf. "The urbanization trend in Asia Pacific is creating an economic multiplier effect -- as more people move to cities and secure jobs and earn more, they will want to buy homes, eat at restaurants, shop and be entertained," he adds.

Infrastructure investors surveyed by J.P. Morgan primarily are targeting North America and Europe; however, during the next 12 months target allocations to those markets are expected to decline to 62 percent from 68 percent (North America) and remain constant at 24 percent (Europe). Commitments to Asia Pacific, meanwhile, are expected to increase to 12 percent from 6 percent.

-- Drew Campbell

Global Trade Driving Up Value
of Urban Industrial Assets
Industrial property owners and developers would benefit from a migration toward infill locations, according to a recent report by AMB Property Corp. The AMB Infill Strategy notes that industrial property owners that have a long-term infill strategy enjoy superior occupancy, rental growth, as well as returns, and efficient supply chain operations. Those infill locations also prove to be more sustainable over time, reducing the environmental impact caused by freight transportation.

Global trade has grown three times more than global GDP during the past 48 years, according to AMB, fueling a demand for industrial space. Property investors and developers have tried to identify the best place to buy or build in order to meet the growing need, providing the best balance of cost and service with distribution and logistics centers. The trend in the United States during the 1990s was to move industrial centers out of infill and into greenfield sites. Many factors contributed to the shift, including the availability of land outside of urban centers and moderate fuel costs. The trend supported more centralized and larger distribution facilities, as well as site consolidation.

Today, AMB notes that supply chains extend further and are increasingly global, forcing the location of distribution centers closer to population centers to cut down on transportation costs and improve service levels. Sustainability has been a major factor as companies strive to decrease the impact of freight transportation on society and the environment.

The report finds that infill locations benefit property investors and developers by reducing the time, distance and cost of both inbound and outbound transportation. Sites that support efficient freight transportation hold a significant competitive advantage, increasing occupancy and rent growth as they meet the growing demand of companies that want more flexible locations closer to population centers.

Overall, AMB reports, "infill sites that are supply constrained and located close to businesses, consumers and global transportation infrastructure will continue to experience higher demand, occupancy, rent growth and returns as compared with their non-supply constrained greenfield counterparts."

-- Ryan Garner

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"It has dawned on them [LPs] that the GPs are not the masters of the universe that they marketed themselves to be. In many ways the biggest firms have got the biggest problems and have lost the highest percentage of assets."
-- Ted Leary, president, Crosswater Realty Advisors, The Institutional Real Estate Letter - Asia Pacific, July/August 2010

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IREI Monthly is edited by Drew Campbell with contributions from the IREI editorial department. Send us your comments, insights and news items.