Trading activity across world real estate markets is unlikely to grow in 2017 but will not plummet either. Real estate as an asset class has taken on a new role in many investment portfolios across the globe and is unlikely to fall out of favour quickly
Global transaction volumes are currently down slightly on late 2015 levels. Some commentators will put this down to the scale of political uncertainty last year, but this misses the fact that activity was already slowing at the tail end of 2015 when it had built to a post-2008 global financial crisis high.
While there are still plenty of geopolitical uncertainties, the established real estate of developed countries is still a reliable, transparent and safe place to store value. That’s why we think 2016 will prove to be the first year of a ‘wobbly plateau’ in transactions rather than the start of a steep decline.
Prime yields for core assets in gateway cities have moved in rapidly since 2010 as investors have found a new role for real estate in their portfolios and competition for assets has mounted. This has led to investors turning to classes hitherto considered ‘alternative’.
Yield compression has been marked in these alternative asset classes over the past five years or so. Residential, Hospitality and Student housing are good examples of such sectors, some of which have seen record levels of global investment activity. Conventional classes are now fully invested, yields have moved in to record lows and some markets look very fully valued. The move to Alternatives means that secondary markets have shown falling yields too.
We think that there has been a shift in the nature of real estate investment risk caused by a longer-term, profound change in the nature of investors themselves.
At the root of this is a demographic shift in developed countries. Baby-boomers are becoming pensioners and are no longer mass savers. This means that investing institutions are no longer just focused on receiving savings premiums with which to grow funds. They now have to generate income to pay pensions and this has broadened their investment search.
Some types of hitherto Alternative real estate are actually very good at producing a steady income stream. UK Social housing, for example, has become increasingly valued for its ability to provide large, predictable net rent rolls linked to RPI and behaving at scale, rather like a long-dated gilt.
The search is not just for income, but for sustainable income streams — rarely have real estate investors been more focused on the rental growth potential of buildings.
We think that the search is still on for real estate assets that will fit these new investor requirements. Our researchers from all over the world have tipped some of the locations and new asset types which will fulfil this brief in 2017, where we could see ‘value’ stocks becoming the new ‘quality’ stocks.
Keith DeCoster, Research Director Savills Studley, New York, looks at how political issues may play out for America’s real estate
Barring a shock to the global economy, 2017 will bring yet another year of strong investment sales in the US, although the outlook for 2018 and beyond is murkier. As well as the increased chance of recession, the prospect of a populist and nativist shift raises long-term concerns. Voters have expressed their discontent with globalisation, and Donald Trump’s embrace of an 'unpredictable' approach to policy will make it challenging for foreign leaders and investors to plot their strategy.
While investors were initially a bit dazed by the election result, some have become increasingly enthused but, like the electorate, many pundits and analysts are deeply divided about whether Trump will boost or botch things.
An unchecked, confrontational Trump administration might pursue aggressive trade negotiations and arms talks with perceived foreign competitors (China, Iran and others), as well as vendettas against old domestic political foes. Countries and companies that cooperate will get benefits. Those who do not could very well see federal funding for some programmes cut. For investors, there could be big differences between picking the right geography and the wrong one.
On the other hand, investors are getting excited about the potential for Trump, together with Congress, to forge ahead with constructive legislation and ‘pro-growth’ measures that could provide some stimulus to the economy. A major infrastructure bill, positive immigration reform, the privatisation of Fannie Mae and Freddie Mac, corporate tax reform and lower income taxes could boost corporate investment, construction activity and household spending power.
So far, Trump seems to be taking a combative stance – sparring on Twitter with China, the CEO of Boeing, union leaders, and a long list of newspapers and networks. A few Chinese investors may already be holding off on real estate investments in the US and considering alternative investments closer to home.
On the bright side, even if Chinese and Middle Eastern funds, two of the deepest pools of cross-border capital, rein in some of their US purchases, it may just clear the way for other countries still very eager to invest in the US.
In the longer term, it would take extreme disruptions to erode the bedrock underlying the value of Residential and Commercial real estate across much of the US. There is little left that is still sacrosanct to US politicians – property rights remain one of the most enduring principles. Capital is not truly blind, though. Chinese banks and funds can be easily told to steer their investments elsewhere.
More importantly, human capital has shown that it will make clear choices. A turn inwards by particular cities, or a wider societal turn against particular religions or lifestyle choices can have economic and real estate consequences. Many US cities have thrived in recent years because of the quality of life and distinct offerings they make to incomers. People, as well as businesses, are already making cultural and political investments – some silently, others much more vocally. In the global war for talent, it is eminently possible that other cities, both within and outside the US, can win some of these battles.
The pool of investment capital pointed at the US is still deep. Even if Chinese and Middle Eastern funds were to withdraw, other foreign investment firms would likely step in.
Investors will still be able to capture higher yield in the short term for core assets in Sunbelt markets such as Atlanta, Dallas/Fort Worth and Phoenix, as well as some Tertiary markets such as Nashville and Salt Lake City. These markets offer pricing that is still generally well under $300/sq ft. Cap rates are generally 200 to 250 basis points above those in core gateway markets.
Trophy assets in Gateway markets – Manhattan; San Francisco; Washington, DC; Boston; Chicago; and Los Angeles – are still the gold standard for capital preservation. Investors should note that growth is at or near peak for net operating income in the highest calibre Offices, Multi-family Residential and Retail properties in San Francisco, New York City and Washington. Rising tax and concession costs will further erode the bottom line for landlords over the next few years.
Talented workers and, in turn, major employers, are moving to Urban cores or ex-urban locations. Atlanta, Raleigh/Durham, Nashville and Austin have all seen rent reach record levels in Core Urban Submarkets. This sets up opportunities for landlords leasing older second-generation A-/B+ office space to highlight the price gap between their asset and the top of the market.
Among the major asset groups, the Industrial sector has the strongest fundamentals. The e-commerce revolution and growth in the logistics/supply chain have pushed vacancy to its lowest mark on record. This sector has more potential for rental rate growth. Distribution centres in key logistics/transportation hubs have become core assets.
As the Asian property market slows, investors need to look further than First-tier cities and at new types of asset to make profits
With its huge scale and diversity, Asia encompasses some of the most sophisticated real estate markets, alongside emerging markets with very little investable real estate.
Having emerged relatively unscathed from the 2008 financial crisis some real estate sectors in Asia barely noticed the crash. Real Australian Residential property prices, for example, saw continuous growth – capital values in cities throughout the region have reached record levels in recent years.
Therein lies a problem. Rents have grown to a level and yields have compressed to such lows that it is difficult to see how they can be sustained.
The name of the game is to pin the cap rate tail on the real estate donkey. Cities such as Singapore may still have some scope to squeeze more before capital values peak, and even First-tier Chinese cities look high-yielding compared to others in the wider region (though not by the standard of PRC interest rates). The sheer weight of money pointed at Shanghai and Beijing could yet send cap rates lower.
Other investors will be wondering where to place emerging markets such as Vietnam, Malaysia, the Philippines and Indonesia on the risk and yield curve. Is a city where the rental growth prospects are aligned to double-digit GDP growth in an emerging economy really a much worse risk than some of the very low-yielding core assets with limited rental upside in the mature, developed cities of the region? Does the 600 basis point difference between Hong Kong and Ho Chi Min City office yields (net effective) reflect a real difference in likely future performance?
Some of the answers, not just for the Asian region but also for the world, may lie in one particular East Asian country. Japan has gone through more than two decades of extremely low interest rates, fully valued, low-yielding real estate, falling prices and depreciation.
The way the Japanese real estate market has matured is instructive. There is a case for investment, which comes not from fast-growing populations or burgeoning economies, but from stability. The capability of sound real estate markets to generate the secure income streams that an increasing number of global investors seek has made some sectors in key Japanese cities look attractive.
The long-term success of many new and emerging markets in the region will depend on them being able to offer the same tradability, openness and transparency for investors that the core gateway cities currently do. Corrupt and closed systems are unlikely to continue seeing the investment flows they enjoy in a high-growth phase unless they lower risk by delivering stability and security.
The Chinese real estate markets are all about opportunistic strategies, with relatively little money targeting core investments.
As with many other markets, Office projects tend to contribute the lion’s share of investments in China. International investors tend to target older, Grade A property in core locations with value-added potential. Meanwhile, domestic investors seek forward purchases of Grade A Office assets for a combination of self-use and investment, as well as stabilised core assets for pure investment.
There are a number of international investors looking very closely at the Chinese Retail segment despite the fact that the market is faced with oversupply, slowing sales growth and increasing competition from e-commerce platforms.
Some investors are exploring opportunities to convert the use of less productive assets. These include upper-floor Retail and Hotels into Office space and co-working space, as well as Office to Residential. With land costs exceeding the value of many of the older buildings occupying potential sites, and the lack of conventional development opportunities in downtown locations, an increasing number of investors are looking at the redevelopment alternative.
We continue to see opportunities in hitherto niche sectors driven by demographic and technological change. These include For-lease residential, Aged care facilities and Data centres. However, Aged care facilities and Data centres face regulatory and control difficulties.
Japan is perhaps the one real estate market in the world that is a genuine diversifier – having already previously experienced some of the monetary conditions with which the West now grapples.
Core-plus is the most competitive segment of the market, as it has expanded to encompass multiple asset classes, including Residential, Retail, Office and Logistics. Inexpensive financing has considerably compressed yields in 2016. However, there may still be some scope for yield compression in Offices, Station-front Retail, High street retail and possibly even Logistics.
The phenomenal growth of inbound tourism to Japan has resulted in a Hotel sector boom. Underlying growth in the industry is still robust and some hotels have room for operational improvement. Also, Hotels in outlying regions should be able to attract more tourists from megacities such as Tokyo, Kyoto and Osaka.
Regional office property could offer attractive returns at lower prices. While many investors are concerned about a large upcoming supply in Tokyo, leasing agents in regions such as Osaka, Nagoya and Fukuoka are much more worried about no future supply and the fact there is little available existing space. On the other hand, regional cities may suffer first when the economic cycle starts to flip.
Popular topics are Self-storage facilities, Data centres, Student housing and Health care facilities. Despite the advantages of being a first-mover in these sectors, these relatively new asset classes have some issues, such as scalability and lack of underlying infrastructure.
These are strange days for the Commercial real estate market in Singapore: rents have been falling for the past two years, while capital values of Grade A office buildings in the central business district are rising.
This sector does not look a good prospect for 2017 as we expect rents to contract further during the year. However, we expect investor yields to compress further, too, so capital values may even rise slightly in some circumstances.
The number of CBD office buildings on sale are few and far between. Vendors are keeping their asking prices high and are hardly budging. So the fundamentals of investor supply and demand are sound, given the fact that there is still a considerable amount of global capital looking for a home.
Those in the current market paying record prices are mostly non-private equity buyers. This is because, at current prices, given the stage of the lease reversion cycle and the risks of further interest rates increases, institutions find it difficult to make a case for investing at all.
What are left are sovereign wealth funds and ultra-high worth individuals who purchase for the long term. When these two reasons come head to head the result is a ratcheting up in prices, upsetting the normal tripartite relationship between the rents, interest rate and capital values.
Australia has been relying on strong levels of immigration to defuse a demographic time bomb. This policy and demographic change provide opportunities for real estate now and in the future.
Population growth in Melbourne and Sydney, coupled with infrastructure investment, means property investment opportunities abound in all sectors. As the cities grow, mini central business districts are expected to form around transport nodes, further increasing investor opportunities.
Hospitals are a large piece of public infrastructure and generally do not close down. As demand for hospital services increases, the land around them becomes more valuable for ancillary services. Short-term accommodation, Entertainment, Retail, Offices, Consulting suites, Services and Parking are just some of the value-add opportunities.
Increasingly, a double-income family is required to afford housing in big cities. As female workforce participation increases, demand for childcare services does too. This offers opportunities for investors and developers in both neighbourhood and near-workplace Crèches, Nursery schools and Day care.
Despite yield compression in recent years, there are still opportunities to acquire growing income streams from attractively priced European cities
Some European cities may have been late to the party but, like global gateway cities, many have now experienced a weight of investment money pressing on all the real estate sectors. Yield compression has become a feature of most markets.
Investors have turned their attention to alternative assets and this has changed the emphasis from real estate ‘quality’ (low-yielding but high capital growth history/prospects) to ‘value’ (high-yielding but possibly lower grade). Already investment activity has started to shorten yields disproportionately in some Secondary and Tertiary markets.
At a global scale, cross-border investment in most European countries is in itself still fairly ‘alternative’. Real estate investment and finance into European cities is largely deployed from within Europe. International investors are more fixated with the UK alone rather than Europe as a whole.
But European cities should be of interest to investors as some of them seem to have lagged behind global trends and therefore still offer opportunities. Others are seeing unexpected and strong economic growth and occupier demand, making it possible to acquire growing income streams at, globally, relatively high yields.
Compelling reasons to invest in European city real estate are increasing. European countries have shown economic growth since the global financial crisis and some European cities have shown even greater growth than the countries in which they sit. For investors willing to accept, or hedge, euro currency risk, European city markets can look good value compared with other global cities, especially in relation to the bond yields available in the same jurisdictions.
Many investors are not expecting low, or even negative, bond rates to persist but still, some cities are pricing real estate at a more substantial discount to bonds than others. Investors in London, for example, are looking for an income return of 175 basis points over gilts while the same investors in Brussels want 512 bps more income than local government bond rates. These figures may not accurately reflect the risk return profile of European city property when the average effective yield, net of bonds, for all major world cities that we monitor is 2.58%.
On this basis, it looks reasonable to say that some European cities, notably Brussels, Dublin, Berlin and Frankfurt, may have further scope for yield compression and that capital growth prospects therefore remain strong. Meanwhile, London, Warsaw and Madrid, in common with other world cities, look more fully valued due to recent capital growth and yield compression.
The UK’s vote to leave the EU in June last year led to a profound change in its investing environment – creating a far greater degree of political and economic uncertainty for both domestic and international investors.
But the fundamentals of UK real estate were little changed in the short term. Currency changes did have a profound effect on returns for non-sterling denominated owners, but cheaper sterling also meant bigger bargains for new investors, some of whom had been playing a ‘wait and see’ game.
On the positive side, the UK still offers safe title and transparent markets for investors looking to deploy capital globally for the long term and who may be faced with very different investing conditions at home.
Following the economic upswing, conditions for investors in Dutch cities have changed dramatically since 2014. Cross-border investments started flowing, investment volumes more than tripled, yields dropped rapidly and niche investment categories have started to blossom.
Prime offices, Retail, Logistics and Residential are much sought after by international investors with office investments very much aimed towards Amsterdam. The number of inhabitants and jobs available there is growing rapidly and the city is attracting talent from all over the Netherlands.
Core-Plus opportunities in Logistics, Retail and Residential remain high. The Logistics and Residential sectors have strong occupier demand, which supports investor interest.
There is room for investors looking for value-add product in Secondary markets, where vacancy, rents and pricing are recovering. We have seen a strong increase in Office conversions and as demand for Residential is only growing, this trend will continue.
Alternative sectors with potential are Student housing (the growth of international students creates further demand for good quality stock), and Care homes, as the Netherlands is among those countries with the highest growth in 80+ age group households.
Investing trends in Germany reflect the broader global and European trends of core scarcity and a move up the risk curve by investors.
Finding property will be even more challenging for investors and occupiers in 2017. Further compression of initial yields is likely to be no more than marginal, so investors will be targeting rental growth potential. We expect to see further rent increases in Prime office locations.
Finding the right balance between adequate yield and acceptable risk will become more challenging for investors. In the Office sector, they will be aided by favourable conditions in the lettings market, leading us to predict a continued shift of investor demand to Grade B properties, Secondary locations and Second-tier cities.
Niche sectors offering stable returns, such as Car parks and Nursing homes, will move even higher on investors’ agendas. We therefore expect greater yield compression in these sectors than in the established sectors. Value-add opportunities may be found in the Retail sector.
Poland is no longer just a low-cost, near-shoring option for occupiers, but contains cities competing directly with the most prominent ones in Europe.
High-quality Offices in Warsaw and the best Shopping centres across the country are the biggest targets for investors with core strategies in Poland. The Office sector is driven by strong occupier demand from the Business and Technology sectors.
Good market fundamentals are stimulating development activity, particularly in the Office and Shopping centre sectors. This creates constant competition among landlords to attract tenants, but distinct winners will emerge through innovative asset management, facilitated by cutting-edge technology.
Investors would do well to consider opportunities in Secondary cities, not only because Prime assets in prime locations have become scarcer, but also because the letting markets are strong. This is mainly due to Business process operations expansions, which are stronger in Second-tier cities than in Warsaw.
The fundamentals for real estate investment look strong in Spain. The economy is expected to grow by 2.2% next year and unemployment in the big cities is falling, so office occupancy and increased retail spending should mean further recovery for core investors.
Core investors may need to pay high prices to get exposure in the prime CBD Office markets, but we forecast that rents will grow by 5.5% in Madrid and 2.3% in Barcelona.
Retail sales are also gaining some of the lost ground of the crisis and are expected to expand by 1.8% per annum over the next three years. We believe that well-located urban Retail will perform well in the future because even the big, bulk retailers are seeking exposure to Small-scale urban formats.
A falling supply of Prime office space in the CBD offers the possibility for older buildings to become marketable again after being refurbished and modernised. Buildings that are less appropriate for office use can be converted into residential or hotel use, with tourism booming and the return of foreign second-home buyers.
Institutional grade Student housing, Care homes and Multi-family housing offer potential to investors who want to enter the market through development.
Retail parks are gaining importance in the market as tenant mix and designs become more diverse and attractive. Six out of the 17 regions in Spain have no retail parks, so future development opportunities should be plentiful.
Investment activity in France was up by 13% in the first three quarters of 2016 compared to the same period in 2015. We believe the French market will retain investors’ attention this year, although we anticipate a wait-and-see attitude leading up to the presidential elections.
The letting market in La Défense is strong and take-up rose by 165% in 2016. This could strengthen further as the district is well placed to attract any financial companies that may relocate from London following Brexit. We expect the Prime CBD rental growth next year to be at 2%.
Although development activity remains limited, it has slowly increased in recent years to meet this demand and offers to core/core-plus investors good opportunities to forward fund Speculative office schemes.
The share of Alternative assets accounted for 19% of investment transactions during the first three quarters of the year against 6% during the same period last year. Yields hardened and can be as low as some traditional commercial assets. Core investors often open special funds to get exposure in these markets, especially those that offer coveted long-term income streams.
‘Value add’ and ‘opportunistic’ investors are slowly moving out of Secondary locations to Tertiary ones in order to find assets. More adventurous investors are increasingly forward-funding speculative development schemes in order to secure buildings, either for their own investment purposes or to sell on.
Real estate in Nordic countries has been something of a gilt-edged asset over the past five years. Norway and Sweden in particular have shown strong economic growth. The only question now is whether such success can be sustained.
Offices, particularly in Stockholm, have become very popular. Prime CBD rental growth recorded in Stockholm between Q3 2015 and Q3 2016 has been 19.6%. Further growth at even half this rate would make Stockholm’s offices a very attractive investment prospect in 2017.
According to our Shopping Centre Investment Benchmark, Stockholm is the best city to target, with the fourth most lucrative Retail market after Düsseldorf, London and Paris. Additionally, retail sales are expected to grow by 2.6% pa on average until 2021.
The Residential market in the Nordics remains a good choice for risk-averse investors. Oslo has enjoyed tremendous value growth in 2016 and analysts are expecting close to double-digit growth for the Residential market in 2017.
Office-to-residential conversion projects will continue in central areas, where the expected price growth is looking very attractive. The modernisation of Offices and Retail premises to new and efficient concepts are also attractive projects, greatly increasing the potential rents. Logistics premises are also high on investors’ shopping lists, mainly thanks to the Nordics' logistics corridor.
Alternative assets, especially Care homes, are becoming extremely popular among opportunistic investors. Data centres are also a growing target due to the natural cooling efficiencies of the Nordics but also high connectivity, lower power costs, abundant resources of green energy and taxation incentives.
The EU referendum result created a far greater degree of political and economic uncertainty for both domestic and international investors. On the positive side, the UK still offers safe title and transparent markets for investors looking to deploy capital globally for the long term.
Our tips for core investors are specialist assets, such as Data centres with secure income streams. Also, the low supply and high demand for Logistics centres make these a sound and secure investment. Regional offices also fit high demand / low supply criteria as speculative development has been virtually non-existent in recent decades.
Multi-family housing is still a new sector in the UK, so in scarce supply, but it has already seen overseas institutional investment and will increasingly become an established investment class because occupier demand is increasing quickly.
In the Residential sector, the limited capacity of traditional house builders offers opportunities for housing development for new and different types of tenure. The key is land – opportunities to add value will arise on large sites that cannot all be delivered for owner-occupation.
Rural land, especially certain Grassland farms in Northern regions that are subject to economic pressures and possible threats from the demise of the EU Common Agricultural payments, is likely to benefit from conversion to Forestry.
Stalled Residential development projects provide opportunities for ‘white knights’ to resuscitate them and may lend themselves for conversion to other uses or more Mixed-use development.
We also expect Battery storage facilities and Off-grid energy parks, capable of supplying a range of on-demand cooling, heat and power, to become an increasingly lucrative prospect for rural landowners.
Rural assets should continue to be an essential part of a well balanced real-estate portfolio with a number of investing opportunities available in Farmland, Timber and Energy
World farmland has been a strong sector in the new millennium. Our Global Farmland Index has recorded average annualised growth of 14.8% since 2002 and 6.6% over the past five years.
The index, which includes a wide range of geographies and farm types, has recorded strong, steady growth with low global volatility. In itself, it illustrates the benefits of a mixed portfolio that crosses world regions and can therefore even out local fluctuations and variations in performance.
With Core Farmland investing opportunities in short supply and yield compression in the sector complete, the name of the game for core and core-plus investors is risk management through portfolio balance and diversification. The global reach and the range of land-based enterprises in the world today, from food to energy production, offer this type of investor the opportunity to spread risk and maximise returns.
Investors looking for a diversified product with good long-term credentials should consider Forestry as an alternative ‘get 100% of your land back’ investment. Forest assets combine the production of timber with the security of land holding and have the unique benefit of adding value as the store of timber on a site matures.
Rural investments have performed well for investors in recent years – we believe the key to future strong returns is a well-diversified portfolio in both asset types and regions.
Farmland values are less volatile than other commodities and were significantly less affected by the 2008 global financial crisis. The long-term fundamentals still apply, with increased food production and competitive land use making Farmland an attractive longer-term investment. The key is to increase unit production through land improvement and efficient use of technology. The right asset in the right market will yield positive returns in the long term.
The price of Timber is forecast to rise as the global population grows and increased demand drives inflation. Returns are realised either from capital growth of the land and the subsequent sale of assets, or by harvesting the timber at maturity.
UK Forests are an increasingly sought-after asset class. Recent UK Forest performance has been excellent, with the long-term annualised total return calculated at 9%. Although returns could come under pressure due to higher demand for the asset, growing timber is a long-term game and our view is that there is plenty of scope for growth in the sector over the next two or three decades.
Romanian Farmland offers investors the chance to acquire high-quality land at reasonable prices relative to Western Europe. It is now possible to source quality assets and viable long-term tenants with a substantial track record of performance.
Energy storage is set to play an important role in electricity networks and will present new opportunities for property owners. Numerous commercially-driven projects are now appearing around the world, including commercial, demand-charge management in San Francisco, distribution upgrade deferral in New York, and via the first commercial contracts awarded by the UK’s National Grid in 2016.
Conventional asset classes in world real estate markets are fully valued. There are some enclaves where further capital growth may be expected, largely in Europe, but they are few and far between.
The name of the investing game is now income. The durability, growth prospects, quality and size of net operating streams will increasingly determine the value that investors put on real estate.
The fundamentals of occupier demand, and their capability to generate rental and other income for property owners, have come into focus and matter much more now in investment analysis than they did before the global financial crisis.
Changes in occupier demands and wants in real estate, the rise of new technologies, new companies and new sectors will change what is most lucrative in real estate markets.
Already, we are seeing alternative types of property become popular. These include Co-working and Flexible workspace, Logistics and Last-mile distribution warehouses, Mixed-use buildings and High street retail premises, for example.
In some countries, sectors that were hitherto considered Alternative investments have become increasingly Mainstream. Student housing, Multi-family housing outside the US, Hotels and Farmland have all become targets for core investors.
More institutions are willing to venture into value add, and even opportunistic, refurbishment, redevelopment, conversion and even development sites in order to secure the new types of assets they want at the scale they want them.
Yield compression has occurred not just over recent years but also between Prime and Secondary property, First-tier and Second-tier cities, and core and Alternative assets.
Changing demographics and ageing populations are influencing many investors, with Care Homes, Healthcare and Retirement living featuring high on some of many opportunistic buy lists.
In 2017 our research teams, independently of each other and across the globe, seem to be agreeing that investors will need to be more adventurous. There are still a few niches where yields can continue their downward trajectory and where capital values will continue to appreciate, but they are rare.
The search for value is taking investors further up the traditional risk curve and into activities they may not have considered ten years ago. It may well be that this diversification will in fact prove to be one of the best ways of de-risking portfolios in future years as conventional asset classes start to underperform.