Investment Strategist Remains Optimistic About Lodging, Suburban Office Real Estate

Tim Pire, managing director with Heitman, joined REIT.com for a video interview at NAREIT’s 2015 Washington Leadership Forum.

Pire said he remains optimistic with regard to prospects in the lodging and suburban office markets. The lodging sector is benefitting from continuing improvement in the economy and limited supply, Pire said. Corporate earnings reports and forecasts for 2015 have also been positive, he noted. Suburban office, meanwhile, has benefitted from the expansion in employment, Pire said.

“What we saw initially in this cycle was that central business district office [markets] did very well. Now that is shifting over into the strong suburban markets,” Pire noted.

Turning to the global markets, Pire discussed the investment outlook in Japan.

“Japan was a laggard last year and started out a little slow this year, but I think what’s going to surprise investors is that economic growth is picking up,” he said.

Stimulus measures from the Bank of Japan (BOJ) are helping the overall economy, according to Pire. At the same time, the purchase of REITs by the BOJ and Japan’s largest pension system should be viewed as a positive step.

Looking specifically at the office market in Japan, vacancy rates there are going down, rents are rising and transactions are taking place at record values, Pire said. That makes him optimistic for the market there now: “We feel pretty good about what’s going to be happening in Japan during 2015.”

Turning to developments in the Greek debt crisis, Pire stressed that while the country represents only a small piece of the eurozone economy, there are concerns about the contagion effect if a settlement is not reached. Having said that, returns for European real estate securities have risen 20 percent in 2015 despite the volatility caused by the situation in Greece, Pire added.

“Net-net, we’re still feeling pretty good about what’s going to happen in Europe this year,” Pire concluded.