Real Estate ETFs: Improvements expected latter half of 2012

Mar 15th, 2012 | By | Category: Alternatives / Multi-Asset

2012 will be a reverse image of 2011, and a tale of two halves for the global economy and the world’s commercial real estate markets, according to global real estate services firm Cushman & Wakefield’s latest MarketView report.

Real Estate ETFs - Improvements expected latter half of 2012

A sluggish beginning to 2012 is expected to give way to improvements in the latter half of the year, believes global real estate services firm Cushman & Wakefield.

While there was a healthy start for 2011, rising uncertainty surrounding the resolution of sovereign debt issues in Europe and the US led to a slowdown in the economy and commercial real estate activity in the second half of the year. The exact opposite performance is expected for 2012, with a sluggish beginning giving way to improvements in the latter half of the year.

“Despite uncertainties, there remains a well of pent-up demand in most nations,” said Glenn Rufrano, President and Chief Executive Officer of Cushman & Wakefield.  “As the year progresses and uncertainty subsides, improving economic conditions will support a boost in commercial real estate activity.”

The main economic and market drivers for the year will be continuing strength in Asia from local demand growth, steady growth in the Americas and weakness in Europe, as sovereign debt issues continue to take a toll. The approach each region takes to reducing its debt issues will be a critical determinant of its economic performance.

FEATURED PRODUCT

iShares FTSE EPRA/NAREIT US Property
Yield ETF
(IUSP)

– Provides exposure to listed US real estate
companies and REITs which have a one-year
forecast dividend yield of 2% or greater.

– Physical replication with full transparency
to underlying holdings

– UCITS compliant, London-listed, UK Reporting
Status, eligible for ISAs and SIPPs

– TER of just 0.40%, considerably less
than actively managed property funds

Six key trends will define the global real estate market in 2012:

1.       Linked Economics But with Regional Differences

As the global financial system continues to become more integrated and trade flows expand, the macro linkages between economies will increase. However, the three main global regions’ very different public debt profiles will result in very different prospects for 2012.

2.       Timing: First Half Second Half

While the second half of 2012 is expected to be much stronger for the global economy and real estate markets, prospects vary by region.

3.       Risks

For the global economy to improve there needs to be movement toward resolution of debt issues in Europe and the US, or at the very least, rising confidence that a solution will be achieved.

4.       Real Estate Opportunities

The evolution of the global economy will likely provide opportunities in 2012 for both real estate investors and occupiers.  Deleveraging will lead to opportunity for investors, as European financial firms come under pressure to dispose of assets to increase capital, with real estate likely to be among those assets sold.

5.       Improving Real Estate Fundamentals

Despite regional differences and early year weakness, the global office leasing market will experience declining vacancy rates and rising rents in 2012, although the pace will vary by region. While the softer global economy is likely to lead to sluggish performance of industrial markets in Asia and Europe, the greatest opportunity is foreseen in North America, where supply growth has been limited and rising demand may lead to higher trade volumes and industrial output.

6.       Active Investment Markets

2011 saw a 14 percent increase in global investment sales to $808 billion. For 2012, a 7.5 percent increase is anticipated, for a total of $867 billion in sales. More product will be brought to market as institutions are in better positions to dispose of assets. While sales are projected to be flat in Europe, at approximately $198.5 billion, and in Asia at $374 billion, investment activity in the Americas is forecast to increase 25% over 2011 levels, to approximately $295 billion.

Real Estate ETFs

For investors looking to gain exposure to real estate via ETFs, there are a number of funds to consider, tracking a range of different regional property indices.

UK

iShares FTSE EPRA/NAREIT UK Property ETF (IUKP)
The iShares FTSE EPRA/NAREIT UK Property ETF aims to track the performance of the FTSE EPRA/NAREIT UK Index, providing exposure to UK-listed real estate companies and Real Estate Investment Trusts (REITs). TER 0.40%. Listed on LSE.

Europe

iShares FTSE/EPRA European Property Index ETF (IPRP)
The iShares FTSE/EPRA European Property Index ETF aims to track the performance of the FTSE EPRA/NAREIT Developed Europe ex UK Dividend+ Index, providing exposure to listed real estate companies and REITs from developed European countries excluding the UK, which have a one-year forecast dividend yield of 2% or greater. TER 0.40%. Listed on LSE.

iShares STOXX Europe 600 Real Estate ETF (EXI5)
The iShares STOXX Europe 600 Real Estate ETF (DE) aims to track the performance of the STOXX Europe 600 Real Estate Index, providing exposure to the European Real Estate sector. TER 0.47%. Listed on Deutsche Borse.

Amundi Real Estate REIT IEIF ETF (C8R)
Component stocks of the Euronext IEIF REIT Europe Index are a selection of the most representative REITs in Europe, chosen for their market capitalisation and liquidity. TER 0.35%. Listed on Euronext.

Asia

iShares FTSE EPRA/NAREIT Asia Property Yield ETF (IASP)
The iShares FTSE EPRA/NAREIT Asia Property Yield ETF aims to track the performance of the FTSE EPRA/NAREIT Developed Asia Dividend+ Index, providing exposure to listed real estate companies and REITs from developed Asian countries, which have a one-year forecast dividend yield of 2% or greater. TER 0.59%. Listed on LSE.

iShares STOXX Asia Pacific 600 Real Estate Cap ETF (EXI7)
iShares STOXX Asia Pacific 600 Real Estate Cap ETF (DE) aims to track the performance of the STOXX Asia/Pacific 600 Real Estate Cap Index providing exposure to the Asia/Pacific Real Estate sector. TER 0.72%. Listed on Deutsche Borse.

US

iShares FTSE EPRA/NAREIT US Property Yield ETF (IUSP)
iShares FTSE EPRA/NAREIT US Property Yield Fund is an exchange traded fund (ETF) that aims to track the performance of the FTSE EPRA/NAREIT US Dividend+ Index, providing exposure to listed US real estate companies and REITs, which have a one-year forecast dividend yield of 2% or greater. TER 0.40%. Listed on LSE.

iShares STOXX Americas 600 Real Estate Cap ETF (EXI6)
The iShares STOXX Americas 600 Real Estate Cap ETF aims to track the performance of the STOXX Americas 600 Real Estate Cap Index, providing exposure to the Canadian and United States Real Estate sector. TER 0.73%. Listed on Deutsche Borse.

First Trust S&P REIT Index Fund (FRI)
The First Trust S&P REIT Index ETF aims to track the S&P United States REIT Index, an index which measures the investable US real estate investment trust market and maintains a constituency that reflects the market’s overall composition. TER 0.50%.  Listed on NYSE.

PowerShares Active US Real Estate ETF (PSR)
The PowerShares Active US Real Estate ETF structures and selects its investments primarily from a universe of securities that are included within the FTSE NAREIT All Equity REITs Index. The selection methodology uses quantitative and statistical metrics to identify attractively priced securities and manage risk. The Fund will invest principally in equity REITs. TER 0.80%. Listed on NYSE.

Global

iShares FTSE EPRA/NAREIT Developed Markets Property Yield ETF (IWDP)
The iShares FTSE EPRA/NAREIT Developed Markets Property Yield ETF aims to track the performance of the FTSE EPRA/NAREIT Developed Dividend+ Index, providing exposure to listed real estate companies and REITs from developed countries world wide excluding Greece, which have a one-year forecast dividend yield of 2% or greater. TER 0.59%. Listed on LSE.

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