Long or short, Mark G. Roberts? The Head of Real Estate Strategy and Research looks at global sectoral trends. Are commercial real-estate fundamentals generally still attractive? ain Across the globe, we currently see a positive spread between long and short interest rates, implying that a recession - with its obvious negative implications for tenant demand and rents - is not likely. In addition, outside of a few markets, the amount of new construction remains low. As a result, vacancy rates are declining and rent levels are increasing, likely leading to higher earnings growth. We continue to favor a pro-cyclical investment strategytargeted at offices and logistics, areas which typically perform well as economic growth increases. But is caution advisable on specific markets? EZI In the United States, the decline in oil prices is expected to have knock-on effects for certain property sectors in Houston. In the United Kingdom, the regions are in an upwards market cycle and we prefer these markets over central London, where the increase in new construction against a background of higher base rates could lead to lower relative returns. Finally, pricing appears aggressive in Singapore and vacancy rates are expected to increase which could create downside risks for capital values. Would listed real estate be resilient to an abrupt rise in interest rates? Listed real estate may appear interestingly valued compared to the broader equity market or Treasury yields. U.S. RE ITs (real estate investment trusts) are also currently trading at a discount of around 2% to the underlying net asset value (NAV) of property held by these companies. (Over the long term, they typically trade at a 5% premium.) When stock valuations become disconnected like this from the private market, we typically see increased share buy-backs and higher levels of mergers-and- acquisitions activity, providing a catalyst for prices to move higher. Still, we are mindful of the