More capital heading to real estate – and more risk appetite

Investment in real estate is headed for a further rise in 2015, reflecting market stabilisation, according to the Global Investment Intentions Survey from non-listed property industry associations INREV, ANREV and PREA. Institutions intend to raise allocations to global real estate to a median 11.3% this year from 10.8% currently, meaning that a minimum €42.5bn is being targeted at real estate this year.

Figures from the latest INREV Investment Intentions Survey shows real estate is set to remain a ‘hot ticket’ in 2015, with the investment target well up from €35bn in 2014. Investors from Asia- Pacific are driving this increase as they expect allocations to rise to 11% from 9.8%. Likewise, North America and European investors will increase allocations in their regions to 9.1% from 8.6%, and to 12.6% from 12.3% respectively.

Of this some 45.1% or €19.2bn of the anticipated total allocation is pointed toward Europe, with Germany, UK and France still ranked as the top three investment destinations for all investors. Italy is now attracting attention, jumping three places to become the eighth preferred target destination this year. A big loser is Turkey, however, which has dropped out of the list of top-15 target destinations.

The INREV survey found an increasing focus on risk – with 41.4% of investors surveyed indicating value-added is their preferred investment strategy, now on a par with core, for which a further 41.4% of investors express a preference. While office remains the preferred asset type, alternative sectors are gaining in popularity. Just over 20% of respondents highlighted assets in hospitality, student housing, healthcare and parking as well as real estate debt as desirable investment targets.

As in previous years, investors display a preference for investing in domestic markets. In Asia-Pacific 67.7% say they will invest in their own region, against 77.5% of Europeans and 68.5% of North American institutions. “However, there are encouraging signs that some investors are moving further afield. Investors from Asia-Pacific, for example, demonstrate a desire for geographic diversification.”

INREV cited an increase of around 20% of Asian investors planning to invest outside their region – with more than half of them targeting Europe and North America. Within Europe, again, the key markets Asian investors are targeting are the UK, France and Germany

INREV has been carrying out its survey in Europe since 2007 but last year teamed up with ANREV and PREA – its counterparts in Asia and the US, respectively – to provide a more global perspective.

Henri Vuong, INREV’s director of research, said: “This year’s survey is broadly consistent with the predicted and actual investment trends we’ve seen over the past couple of years. It’s a case of investors chasing dependable returns through real estate in an otherwise unexciting investment landscape.”

“But we can’t ignore the cyclical nature of real estate – what the survey shows us could also be reflective of a market enjoying a period of calm before the storm.”