Scott Crowe, global portfolio manager at Resource Real Estate, joined REIT.com for a video interview during REITWeek 2014: NAREIT’s Investor Forum, held in New York.
Crowe was asked about the impact of the slow economic recovery on asset allocation and where investors are most focused right now. Crowe explained that a slow pace of recovery is actually good for real estate because it means that interest rates are going to stay low “and there are not enough animal spirits to really start development.”
“We’re in for a sustained period of low interest rates and low supply,” Crowe said. Meanwhile, the economic recovery is gaining pace and is strong in certain sectors, including technology and energy.
“That’s very, very good for some cities and submarkets, so it means when we’re allocating capital, we really have to concentrate on the specific city and even the submarket,” Crowe said.
In terms of international markets, property values in Europe are “cheap,” Crowe noted, because Europe’s real estate cycle is two years behind the United States. While Europe does face its headwinds, Crowe added, “the worst is behind us, and that’s where we’re spending a lot of time.”
The London property market, Crowe continued, “is just on fire.”
“It’s a fantastic real estate market. I wouldn’t say it’s a cheap real estate market, but there’s definitely enough momentum to see that market continue to move forward over the next couple of years,” he said.
The most interesting part of the U.S. market right now is the office sector, Crowe said.
Crowe also commented on proposals from the Financial Industry Regulatory Authority (FINRA) that are intended to increase transparency for public, non-listed REITs (PNLRs).
“It’s going to be a game changer for the non-traded REIT market,” predicted Crowe, pointing to better products and lower fees as likely outcomes of the new proposals.
He noted that strong investor demand for PNLRs is fueled by their low correlation to the broader market and high levels of income. The new rules “are going to be very positive to how the sponsor side provides an answer to that need,” he said.