Real estate in most parts of the globe remains attractive for investment. Improving proper-ty fundamentals with little new construction in the near-term are supporting a rebound in incomes globally. While yields have compressed for core real estate in prime markets, spreads to local government bonds remain at historic highs, providing strong relative per-formance. Additionally, lenders are slowly returning to the market and providing attractive financing, resulting in stronger investor demand and rising transaction volume.
While the real estate investment market continues to improve, economic uncertainty in all three regions, Asia Pacific, Europe and the United States, remains a threat to the outlook. Reduced global trade, austerity in the developed world and the tenuous conditions in Eu-rope could drag on economic growth and decrease the amount of investment opportuni-ties. Asia Pacific and the United States will likely have stronger economic growth in the near-term with fewer risks to the outlook relative to Europe. Accordingly, for global inves-tors we continue to recommend an overweight in Asia Pacific and the United States, while maintaining an underweight to Europe.