Real estate set to deliver healthy income for investors

Prime real estate assets in core developed markets will pay a healthy income to global investors in the medium term according to head of real estate research and strategy for Standard Life Investments in the UK, Anne Breen.

The emphasis on "more resilient, commodity supported and transparent real estate markets" will grow as the Europe issue wages on, according to Breen.

She said Australia and Canada were perceived as "safe-havens" by investors due to low single digit vacancy rates and low government debt to GDP (gross domestic product) ratio. 

"However Australian superannuation funds, which have predominantly focused on the Australian real estate market, are increasingly looking offshore to countries such as Europe and the US, particularly as investors look to build up some inflation protection through their European portfolio where index linked leases are commonplace," she said.

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Standard Life expected UK capital values to weaken by 5 or 6 per cent over the next 12 months, while Australian capital values should strengthen by 4.8 per cent over the year before moderating.

Breen said the US recovery would be underpinned by a higher proportion of capital returns in 2014 if interest rates remained low.

She said global real estate investors would tighten their focus on income with modest or no growth in rents and capital values due to a medium term inflation concern.