2005 Investment Strategy Annual LaSalle Investment Management Lynn C. Thurber Chief Executive Officer Jack Chandler Regional CEO, Asia Pacific Managing Editors Amy P. Erixon Jacques N. Gordon, Ph.D. Canada and Mexico International Director, Investment Strategy Jeff Jacobson Gerald F. Blundell Regional CEO, Europe European Director, Investment Strategy Wade W. Judge Robin N. Goodchild, Ph.D. CIO, United States European Director, Research and Strategy Stan Kraska William J. Maher Securities, United States Regional Director, North American Research and Strategy Robert La Fors David Edwards Securities, Europe Director, Asia Pacific Research and Strategy Ian Mackie Private Equity, Asia Pacific Research Staff Keith Pauley Securities, United States Gillian de Almeida Simon Marrison Matthew Barrowclough Private Equity, Continental Europe Mary Burke Peter H. Schaff CEO, United States Josh Gelormini Celia Jennings Gregory Golovkin Global Client Services Toyokazu Imazeki Kimball C. Woodrow Nathan Kane Global Chief Operating Officer Matthew Keane Alberto Lopez Alexander Lyell Catherine Marshall Katherine McNeil Darren Mewha Kim Palmbush Andrea Pavelka Matthew Ryall Chris Saunders Alistair Seaton Elysia Tse Past performance is not a guarantee of future results. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. LaSalle Investment Management and Jones Lang LaSalle take no responsibility for any direct or indirect damage or loss suffered by reason of the inaccuracy or incorrectness of this document. LaSalle Investment Management is a member of the Jones Lang LaSalle group. www.lasalle.com 2005 Investment Strategy Annual 2 6 Investment Opportunities and Risks Constructing a Cross-Border Portfolio 13 Regional Outlook for 2005 14 Asia Paciﬁc 21 Europe 28 North America 34 Logistics Real Estate 36 Model Portfolios A new challenge faces the real estate asset class. The question today is not whether to include real estate in an investment portfolio … it is how and where to invest next. The expansion of real estate portfolios to include strategies that combine domestic and international holdings, low- and high-risk strategies, private equity and listed securities adds up to an asset class that has matured. It is the job of this 2005 Investment Strategy Annual to help investors make educated investment decisions about all the choices they now face. Page 2 Investment Strategy Annual 2005 Investment Opportunities and Risks Investment Opportunities and Risks The Price of Success into 2005. It also suggests a possible solution—the Real estate enters 2005 as a well-accepted part of an gradual expansion of real estate portfolios to include investment portfolio, alongside stocks and bonds.After strategies beyond the three or four most common “food occasionally suffering from a credibility gap in the 1980s groups”1 in one’s home country. and early 1990s, this asset class has now produced steady, strong performance for more than a decade.As a Actuary vs. Head of Real Estate allocation direct result, real estate has earned a permanent place in Actuary: My assetpercent. model says to raise real estate allocation by 2 percent to 4 the long-term strategic plans of investors from all over Head of Real Estate: At current pricing? Are you sure? the world. Now, a new challenge faces real estate. The Actuary: This is not your decision … get invested. question today is not whether to own a real estate port- Head of Real Estate: But my managers and I are all paid to beat the Index, and I can’t buy the Index. folio … it is how and where to invest next. As prices for Actuary: Even if you are a bit below the index, we need what your asset class direct assets and real estate securities have risen around delivers to the portfolio. the world, investment managers must ﬁnd a way to out- CIO: Let’s be thoughtful here, we have made mistakes in the past forcing money perform under a very different set of circumstances into frothy markets. Isn’t there some way we can increase the real estate allocation without overpaying? compared to just a few years ago. In this frothy capital and Actuary come out of an with this market, investors certainly must stay alert in order CIO“We don’t care if you expandexecutive sessionreal estatemessage: ag land, the definition of to include to harvest outsized gains or cull chronic under- hotels, air cargo buildings, healthcare real estate, REITs, international, whatever ... it’s the combination of contractual income with an performers. But real estate’s permanent status in the inflation-adjusted residual that our fund needs over the long term.” portfolio suggests that too much “market-timing”would Source: LaSalle Investment Management. run counter to what asset allocators and ﬁnancial plan- ners try to achieve.A well-diversiﬁed portfolio matches Real estate portfolios are expanding to include strategic long-term holdings with long-term financial strategies that combine domestic and international needs. Market timing in real estate, or any asset class, holdings, low- and high-risk investments, private equity can create new problems: reinvestment risk, higher and listed securities, and investment-grade and “dis- transaction costs, or simply the lack of perspective on tressed”debt—all of which adds up to an asset class that relative pricing across all asset markets. has matured. There are multiple ways to invest in real Investors then should have a realistic view of what estate now, just as there are for stocks and bonds. The lies ahead, especially in light of recent strong perform- methods for ﬁnancing hard assets like real estate have ance for both listed real estate securities and private real grown more sophisticated over the years as have the estate in many of the major markets of the world. ways to invest. With its development as a mainstream Success can create unrealistically high expectations. asset class, the real estate sector has become more trans- This situation creates tension between what asset allo- parent. This is a secular, not a cyclical trend—rarely, if cators expect from real estate and what those ever, does an asset class retreat from high back to low responsible for real estate investment think is achiev- transparency. Real estate veterans, who suspect that able. The following dialogue summarizes the dilemma most of the recent run-up in prices is cyclical, should we real estate investors must contend with as we head not be surprised by today’s high prices and low yields. 1 In Europe the food groups are: ofﬁces,retail units (high street,retail warehouses and shopping centers) and warehouse/logistics properties. In North America and Asia Paciﬁc they are: ofﬁces, shopping centers, industrial parks/logistics properties and rental apartments.
Pages to are hidden for
"real estate investment strategies"Please download to view full document