INREV: real estate a ‘hot ticket’

In its annual intentions survey, the European industry association said opportunity funds remained ‘lower down’ most investors’ lists of preferred investment strategies but had nevertheless seen a significant gain in popularity.

Asian investors are expected to propel the amount of capital chasing real estate investments in 2015, according to a sector survey revealed today.

The European Association for Investors in Real Estate Vehicles (INREV) said in its annual Global Investor Intentions Survey today that nearly 46 percent of investors had declared an interest in increasing allocations to global real estate. It stated that €42.5 billion was being targeted at the asset class in 2015, a rise on €35 billion stated in 2014.

The trend, explained INREV, is being driven largely by investors from Asia Pacific who expect to increase current allocations from 9.8 percent to 11 percent this year, while their counterparts in North America and Europe will increase allocations from 8.6 percent to 9.1 percent and from 12.3 percent to 12.6 percent respectively. Total allocations across all geographies and sources of capital mean allocations are anticipated to rise to 11.3 percent from 10.8 percent currently, said the association.

However, of keenest interest to those raising and managing higher-returning funds, INREV reported that while opportunity funds remained “lower down” most investors’ lists of preferred investment strategies, they had nonetheless seen a significant gain in popularity, rising from 7.1 percent in 2014 to 17.8 percent.

The balance in favor of value-added and opportunity funds versus core funds is greater among investors in Europe and North America than among those in Asia Pacific. Also, almost 74 percent of investors expressed a preference for closed-end over open-end fund structures. They also preferred seeded pooled investments to blind pools, as well as funds with a gross asset value up to €500 million rather than those above €500 million. Overall, INREV discovered there was an increasing focus on risk with 41.4 percent of investors selecting value-added as their preferred investment strategy. This put value-added on a par with core, for which a further 41.4 percent of investors expressed a preference.

Matthias Thomas, chief executive officer at INREV said in a statement: “The insights from this year’s survey could be pointing toward potential structural shifts in the real estate industry.” He said that in addition to the growing tilt towards risk and an apparent blurring of the lines between the investment strategies adopted by investors, fund of fund managers and fund managers, there was a subtle hint that the conditions might exist for the creation of a secondary market for trades.

A considerable volume of capital – 45.1 percent or €19.2 billion 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 has attracted attention, jumping three places from last year to become the eighth preferred target destination. Meanwhile, Turkey has dropped off the list of top-15 target destinations.

Meanwhile, alternative sectors are gaining in popularity. Around 20 percent of respondents highlighted examples such as hospitality, student housing, healthcare, real estate debt and parking as desirable investment targets.