Global real estate opportunities

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For real estate investors, global markets look brighter than those in the US today. International property prices caught fire three or four years ago, at a time when it wasn’t easy for individuals to buy in. Today you can. There are at least 16 retail mutual funds and three exchange-traded funds (ETFs) trained mainly on Europe, Asia and Latin America. Some of them include US properties, others don’t.

In the US, the funds own shares principally in real estate investment trusts, or REITs, especially equity REITs that operate various types of commercial property -- office buildings, hotels, malls, apartment houses, industrial warehouses and so on. REITs or REIT-like structures are now developing in other countries, too, including Australia, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan, Netherlands, Singapore and the UK Where REITs don’t exist, the funds buy shares of operating real estate companies.

As diversifiers, REITs and real-estate companies land somewhere between bonds and stocks, providing steady rental income combined with capital gains if the properties rise in value. Often, real estate does well when other parts of the market sag.

Global diversification lowers your risk even more, by exposing you to more than one interest-rate or real-estate cycle. While the US office market appears to be going soft, booming global trade is driving up property prices in international port cities and financial centers.

Broader market

Private equity is there already. So far this year, 101 real-estate funds have raised $63.9 billion, according to London-based Preqin, a private-equity consultant. Less than half of that money went into the US. The rest was divided roughly equally between Europe and the rest of the world.

Internationally, the groundwork is being laid for a much broader, publicly traded property market, says Samuel Lieber, head of the Alpine International Real Estate Equity Fund. “In 1989, we were hard pressed to invest in 16 countries,” he says. “Now we’re invested in 28 and looking to invest in 35.”

Lieber singles out Brazil as “potentially the most interesting market in the world.” It’s newly developing a public real estate market, 30-year mortgages are now available and demand for real estate is strong.