European investors will be the frontrunners for deploying capital in real estate during the next two years, according to a joint investor intention survey by the European Association for Investors in Non-listed Real Estate (INREV), the Asian Association for Investors in Non-listed Real Estate Vehicles (ANREV), and the Pension Real Estate Association.
While investors on average are getting closer to their target allocations in the asset class, they continue to be bullish overall about real estate investing going forward.
Overall, 80.4 percent of investors in the survey, conducted among 144 institutional investors and 10 fund of funds managers, want to increase their real estate allocation in the next two years as a percentage of their overall AUM. Breaking the survey down into regions, it showed that 91.6 percent of Europe-based investors want to increase, while that number was 55.3 percent and 35.5 percent for North American and Asia-Pacific investors, respectively.
North American-based investors were the regional group with the largest percentage of respondents – 14.6 percent – that expect to decrease their allocation to real estate.
Target allocation size is often determined by the maturity and size, according to Henri Vuong, director of research and market information at INREV. The North American investors participating in the survey had larger real estate portfolios and longer investment histories in the asset class compared to the respondents in Europe and Asia-Pacific.
“For the last three years, we have been hinting that investors intending to decrease real estate allocation were doing so due to selling off assets in late-cycle markets,” Vuong said.
She added: “But another of the drivers for relative reduction are relatively large share of AUM allocated to real estate. Looking at a possible downturn, investors with this profile look to diversify.”
Vuong explained that most investors based in Europe and Asia-Pacific in general are still in growth mode within real estate investments, with China being the noteworthy exception due to the government’s increased capital controls.
The equally weighted number for the INREV/ANREV/PREA survey showed that 50 percent among investors want increase allocation to real estate during the next two years, while 40.7 percent aim to maintain and 9.3 percent to decrease. As a comparison, a PERE Perspectives 2019 survey among 101 institutional investors globally, 15.6 percent expected to increase their target allocation to private real estate, 63.3 percent will seek to maintain allocation, while the remaining 21.1 percent will decrease.