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Investment Intentions 2020: €98 billion in fresh equity to be deployed in global real estate this year

This figure comprises €88.5 billion from investors and €9.6 billion from funds of funds and represents an increase of more than €20 billion compared with the figures recorded in 2019. More than 60% of this capital will come from European institutional investors, while the rest is split almost equally among APAC and North American institutional investors.

Institutional investors are also increasing their preference for riskier strategies in Europe. Around 20% of all institutional investors selected opportunity as their preferred strategy for 2020. This represents a substantial increase compared with the number recorded last year (9.8%).

The current average allocation to real estate increased from 10.0% in 2019 to 10.4% in 2020. Over the same period, the target allocation also moved up from 10.4% to 11.4%, resulting in a larger gap between current and target allocations. Value added remains the favoured investment style, although it has decreased from 51.1% to 42.5% compared with the previous year. The number of investors selecting core as their preferred style dropped from 39.1% to 37.5% although it remains the second preferred style.

Additional highlights include:

  • The gap between current and target allocations increased from 0.4% in 2019 to 1.0% in 2020
  • Riskier strategies are increasingly popular with 20% of the investors selecting opportunity as their preferred strategy for Europe
  • Germany is the most preferred destination for investors and funds of funds across Europe for the second consecutive year
  • Office remains the preferred sector while retail falls out of the top 3.

When asked about preferred sectors, investor and funds of funds selected office, residential and industrial logistics, while retail was selected only by 43.1% of investors and 10.0% of funds of funds as their preferred sector.

Development increased in popularity among institutional investors compared with previous years reports. Student accommodation and healthcare decreased for investors but increased for funds of funds sectors compared with the report of 2019.

Germany, UK and France remain the top 3 preferred European destinations for investors. Funds of funds placed Germany, France and The Netherlands in top position, followed by the UK in second and Portugal and Sweden in third place. France office remains the preferred country/ sector combination for the third year running.

Access to expert management keeps its position as the number one reason to invest in non-listed real estate funds for investors and funds of funds while the most challenging obstacle for both groups is still the availability of suitable products.

The Investment Intentions Survey explores aspirations for investment into the real estate sector over the following two years, with a focus on non-listed real estate funds.

james.wallace@realassetmedia.com