‘Flight to safety’ escalates among international real estate investors

The ‘flight to safety’ has escalated over the past 12 months as international investors become more cautious, according to London-based online investment platform BrickVest’s latest commercial property investment barometer.

Indeed, the appetite for high risk real estate investment strategies has plummeted by 24% y-o-y, according to data gathered from 4,000 international investors on behalf of the study. As a result, appetite for low and moderate risk strategies, including core and core-plus, has risen by 16% and 5%, respectively, in the period. Investors’ projected allocation to real estate over the next 12 months remains unchanged at 3.3% of total assets under management.

‘Commercial real estate markets are attracting record levels of capital but the barometer strongly indicates that investors are becoming more attracted to lower risk strategies,’ said BrickVest’s CEO, Emmanuel Lumineau.‘At this late stage in the cycle, it’s likely that many investors will be looking to trim their exposure to higher risk assets and liquidity will become increasingly attractive, so they can be better protected should the market start to turn. Whether more investors will join the flight to safety will be a key trend to watch over 2018.’

While capital growth and income remain the two leading investment objectives, support for liquidity has surged by 40% over the past year, suggesting that investors are increasingly focused on easier divestment should the market cycle begin to turn.

The barometer shows that investors’ overall risk appetite has fallen by around 10% with favourability towards prime assets rising by 6%, whereas interest in secondary assets has fallen by 9%.

Despite Brexit shenanigans, the UK remains top dog as Europe’s most popular commercial real estate market (31%), ahead of Germany (23%) and France (18%), according to the barometer. (ssk)