What do you do in a world where an Italian government bond yields more than a Milan office building? That is the quandary that investors in real estate and other asset classes are pondering as the sovereign debt crisis, centred in the euro zone, continues to wreak havoc in financial markets across the world. Investors are grappling with how to allocate capital in an environment where the supposedly risk-free rate offered by government bonds has become decidedly risky, depending on the government, and where there is a tangible risk that the world will be plunged back into financial chaos by a break-up of the euro.

So where does real estate sit in this altered financial landscape? In the first leg of the credit crunch, real estate values plunged, as the asset class was lumped in with financial assets and other high-risk sell-offs, and a sharp reduction in exposure by institutional investors was accompanied by a flight from the sector by investors in open-end property f