EPRA 2015: JP Morgan has predicted a positive outlook for listed property companies over the next two years.
Tim Leckie, an analyst with the US investment bank, speaking at the EPRA 2015 conference in Berlin, said a low interest rate environment combined with growth in rental income and asset values across Europe would outweigh the impact of stock market declines on companies.
“The summer’s turmoil in financial markets has probably pushed back the lift-off point for interest rates or flattened the speed at which they will rise,” he said. “This means that for the next 24 months or so we will have a continuation of the positive environment for the property industry.”
Leckie believed that the slide offered an opportunity to invest in listed property, because many blue chip companies were now trading at a discount to their net asset values. By doing so, investors could see as much as a 16% upside.
The UK remained the best prospect for investment, with rents up since March by 1.2%, according to the latest IPD data, Leckie said. In contrast, he said, other European markets had seen declines or at best only steady growth at 5% since 2009.
London’s City office market, which has grown by 44% since 2009, would see negative income growth following 2018, following the completion of a number of development projects, he warned.
But he added that the positive news for listed companies was that no REIT operating in the sector had any project expected to complete beyond this date. Therefore the growth was likely to come from the Spanish, German and Irish markets, where supply constraints still existed.
Dublin offices could expect annual growth of 12% and Madrid offices by 10%, he said, adding that even underperforming Netherlands markets could well see growth in the coming months.
