EPRA: renewed interest in European listed real estate

US, Canadian and Middle Eastern investors are showing interest in European listed real estate again, according to Dominique Moerenhout, CEO of the European Public Real Estate Association.

Despite geopolitical and economic uncertainty, “it is clear that there are substantial sums of capital poised to be deployed into European real estate”, he said reflecting on his conversations with investors at the recent MIPIM conference in Cannes.

It is now a matter of when, rather than if, Moerenhout he said: “My main takeaway was that there is ample institutional capital ready and willing to invest in Europe’s listed real estate sector. I was also surprised by the level of engagement from the U.S. investors I met. This was more positive than I was expecting and suggests to me that they are assessing investment opportunities in Europe on merit rather than through a geopolitical lens.”

Another positive surprise was “the appetite of Canadian institutions and investors from the Middle East for the European listed real estate sector”, he said. “I left the conference deeply encouraged by how those same investors regard listed real estate and its potential place in their strategies for the next investment cycle.”

The volatile global geopolitical landscape is a major barrier to these potential flows as the world adjusts to the Trump administration’s rapidly evolving ‘Make America Great Again’ agenda.

European governments have responded by pledging to increase defence spending, with far-reaching consequences for public finances and borrowing costs. Meanwhile, there is little visibility on growth prospects for Europe’s economies and the future trajectory for interest rates amid signs inflation may be starting to pick up again.

“It might take six to 12 months for this fog of uncertainty to lift sufficiently for investors to gain the confidence to deploy capital”, Moerenhout said. “In the short term for listed real estate this may mean a slowdown in the number of companies seeking a listing through an IPO. Balancing this concern, however, was how many institutions told me that they regard the listed sector as the entry point for a strategic asset allocation to European real estate.”

Investors said they wanted exposure to certain sectors, particularly in the alternatives space, through platforms of scale that are more complicated to replicate in private markets.

“Another major attraction for them was how the listed sector offers an attractive entry point”, he said. “After all, the sector is trading at an average 25% discount to net asset value so investors don’t see why they should invest in private markets when valuations are still adjusting.”