The number of listed properties in commercial structures worldwide could jump by as much as 70% in the next four years, according to Fidelity.
The investment firm says growth is likely to be faster in Europe and Asia and will gradually reduce the dominance of the US in the market.
According to Fidelity, demand has been fuelled by the introduction of REITs in a number of countries such as the UK and Germany and points out a further 10 countries are either about to convert or are discussing the possibility.
Polly Kwan, manager of the Fidelity Asia Property fund, says Asia should be a particular target for investors.
“I currently favour Japan,” says Kwan. “After 15 years of market downturn there are signs of recovery in the property market. Office vacancies are steadily declining and the pace of rental growth is accelerating, rising to 15% year on year this February.
“At the same time there is increased demand for office space in prime locations while supply remains limited for the next few years.
“The overall picture is very positive and with landlords able to negotiate higher rents, yields are attracting foreign investors.”
Kwan also says there are good prospects for capital growth in the long term in China and India.
She says both markets have favourable demographics and a good economic outlook.
“I believe there will be consolidation in both markets so while there are plenty of opportunities emerging, it will be important to manage risk by picking property companies that will stay the course,” she says.
Steve Buller, manager of the Fidelity Global Property fund, says European countries should not be discounted.
He says: “For me, Germany holds particular interest at the moment. It is the third largest economy in the world but one of the least securitised property markets.
“Although it has the largest bank of property in Europe it currently has less than 0.5% of commercial buildings owned by REIT-like structures. The introduction of REITs will hopefully be the start of a securitisation trend.
“If there is one cyclical recovery story still to play out in the world it is in the German office sector. Take up and absorption trends are improving, new office supply is low and prime yields are relatively attractive at slightly over 5%.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Scott Sinclair on 020 7034 2636 or email [email protected]IFAonline
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