North American Real Estate Continues to Rise

CHICAGO—Real estate markets across the US, Mexico and Canada continued to show improvement in the first half of the year, according to LaSalle Investment Management. The Chicago-based firm just released its Mid-Year Investment Strategy Annual report, and found that all three countries “showed stronger debt availability and liquidity while pricing improved more than LaSalle expected.” And although initial yields and projected returns in all three are near all-time lows, the “spreads to sovereign debt and corporate bonds are well above average.” The researchers also note the volatility in fixed-income and equities markets, but feel “this may be a temporary correction or the start of the “regime change” based on the pullback from QE LaSalle wrote about early this year in its Investment Strategy Annual 2013.”

With interest rates near historic lows, capital markets remained quite healthy during the first five months of the year. Benchmark interest rates hit record lows in the US, resulting in falling borrowing rates, improved debt availability and better borrowing terms. As a result, prices have risen throughout the continent for real estate that can attract favorable debt. “However, the recent rise in Treasury rates has weighed on U.S. REITs, which are down 16% from the May peak and flat year-to-date.” Still, the impact of this should be modest, LaSalle says, and slow, but not reverse, recent increases in real estate values.