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With lofty real estate pricing, rental income is key in 2017 | The Investor

As core real estate pricing climbs past prior peaks in key global gateway cities due to a shortage of supply and strong demand, investors should focus on generating income from quality buildings and tenants.

“Concentrate on income in 2017 because trying to generate significant capital growth is going to be difficult given current pricing”, says David Green-Morgan, Global Capital Markets Research Director at JLL. “The quality of the building and its location will be important factors to consider as well as the quality of your tenants. You should also be aware of the dynamics that your tenants are going to face in the coming year in terms of workforce expansion or contraction and increasingly the global political environment.”

Globally, the development pipeline continues to be relatively weak. Banking regulators and new risk regulations have enforced discipline on commercial lending, a primary factor in the slowdown in development and construction. In some areas construction costs have also risen.

“Development always involves higher risk and you see the lenders continuing to shy away from financing development,” says Green-Morgan. “If the economy does expand as predicted this year, we will definitely run into a situation where there will be a shortage of space in a number of locations around the world and rental growth will increase quite rapidly in that scenario.”

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With lofty real estate pricing, rental income is key in 2017 | The Investor.