Good Time for Investors to Enter U.S. REIT Market, Heitman's Pire Says

9/21/2011 | By Matthew Bechard

Heitman Managing Director Tim Pire said the best real estate investment opportunities in Europe can currently be found in central London and Germany and its surrounding region. Pire spoke with at the European Public Real Estate Association's annual conference in London in early September.

"Those real estate markets have been strong and the underlying economies have been stronger than other markets," Pire said.

On the flip side, Pire said there are many countries in the periphery of Europe that are struggling, including Portugal, Ireland, Italy, Greece and Spain.

"They are really struggling with what is going on with their economies and how that is having negative impacts in terms of employment, real estate values and real estate fundamentals," Pire said. "There will be limited opportunities in these markets until the situation starts to stabilize."

Pire said as a whole the expansion of the REIT approach to real estate investment across Europe has had a positive impact, although not as much of an impact as he would like.

"I wish the REIT market would have grown more than it has because I think it is a great vehicle in terms of giving individual and institutional investors a chance to invest in liquid real estate across a number of different markets they might not otherwise have exposure to," Pire said. "Through REITs, investors can diversify by property type, geographic region and relative to different strategies."

Pire said there are several positive reasons the REIT market in Europe should start to grow more rapidly. First, he said REITs did fairly well during the financial crisis and have recovered fairly quickly. Second, there has been new legislation passed in areas like Italy and discussions underway in other markets to either create new REITs or enhance existing legislation, Pire said.

Looking at the U.S. REIT market, Pire said the summer sell-off put REIT shares at a discount to net asset values. While the continued economic weakness has slowed improvements in real estate fundamentals, Pire said the strong capital flows should support pricing.

"I look at the fact that we have had a move in the capital markets. Real estate fundamentals haven't moved that much. So NAVs have probably moved a little bit, but not as much as stock prices," Pire said. "It has created a good entry point to get into the sector if you have a longer-term view."