Arguably, the economic context for institutional investment has never been more uncertain. This is particularly the case in Europe, where the euro zone sovereign debt crisis overlays substantial additional risk. Normally, an illiquid asset such as real estate would be out of favour under such circumstances, with investors looking for highly liquid assets to maintain flexibility. Yet the underlying qualities of real estate mean that in many ways it is well suited to cope with today’s volatile economic environment.

INVESTMENT DRIVERS

Reasons for investing in property can be divided into two categories: relative pricing and portfolio characteristics.

If property as an asset class is underpriced (relative to other asset classes), it should generate higher risk-adjusted returns in the short to medium term. High transaction costs, and the time it takes to trade, mean that it can be difficult to take full advantage of such mispricing, but this is sti