Europe to see largest share of €48bn global investment in 2016

Investors will commit at least €48bn to global non-listed real estate in 2016, up 13% from last year with the lion’s share flowing into Europe, a new survey from the three regional groups INREV, ANREV and PREA shows. (INREV, which had been carrying out the survey since 2007, teamed up with its sister organisations in 2014 to provide a more global perspective.)

More than half of all investors expect to increase property allocations over the next two years, the associations’ latest Investment Intentions Survey found – due to an enduring appetite for property in the quest for long-term income, diversification and inflation hedging. The average global investor is targeting an overall real estate allocation of 10.3% over the next two years, 90bp ahead of the current 9.4%, with European investors above average at 11.4%.

The survey of 345 investors and fund managers with almost €2tr of assets found an enduring appetite for property in the quest for long-term income, diversification and inflation hedging. The survey was carried out by the European Association for Investors in Non-listed Real Estate Vehicles, its Asian sister association ANREV, and the Pension Real Estate Association.

Europe and North America are expected to contribute around 40% each of the total real estate capital in 2016, with Europe forecast to take 41.9% and the US 35.5%. Fund of funds managers significantly favour Europe where they intend to deploy 59.3% of their capital.

Henri Vuong, INREV’s Director of Research and Market Information, commented: “Appetite for real estate seems as strong as ever regardless of investor domicile and this year’s Survey highlights some interesting themes. For example, the appeal of the big European cities remains undiminished. Despite pricing issues in places such as London, investors clearly feel the benefit of these mature and relatively liquid markets where it is easier to invest and therefore easier to avoid cash drag.”

Germany remains top destination for investors – with 73.5% intending to invest there. France is second at 61.8% and the UK third with 58.8%. The Netherlands was the target for 39.7%, Belgium 36.8%, Finland 33.8%, Sweden 32.4% and Denmark 32.4%. However fund of funds managers all put the UK top with Germany, France and the Netherlands sharing second while fund managers rated Germany top at 65.6%, the UK 64.8% and France 48.4%.

Offices are set to attract 88.2% of investors, retail 77.9%, industrial/logistics 58.8% and residential 54.4% and the survey found investors continue to move up the risk curve with value added now preferred to core. Vuong added: “We could be forgiven for identifying patterns that resemble the situation in 2007. However, market composition is very different today and the focus seems much more tilted toward long-term income with the stability that that implies.”