MIPIM 2015: Investors moving up the risk curve

The attractiveness of value add and opportunistic real estate among investors has risen 10 percent since last year, according to a survey of investors conducted by CBRE.

The firm’s 2015 Investor Intention’s Survey revealed that investors were now looking at moving up the risk spectrum as the level of interest in real estate and the capital available for investment was blocking access to core assets. The survey of 280 real estate investors said that access to competitively priced stock was the biggest problem for investors today.  Nearly all – some 91 percent- of investors cited one of ‘availability of assets’, ‘asset pricing’ or ‘competition from other investors’ as the biggest obstacle to investing.

“Investors are constantly having to evolve their investment strategies, in their pursuit of yield and returns, as demand for European commercial real estate shows no sign of abating,” Jonathan Hull, managing director of EMEA capital markets at CBRE, said. “This diversification is leading investors into new markets and sector. However, there is still significant demand for core locations and assets, particularly from the growing influx of capital from outside the region.”

This diversification has led to an increased interest in ‘alternative’ real estate. Real estate debt has seen the most dramatic increase in activity over the last two years, from under €10 billion in 2012 to €49 billion in 2014 and is set to remain the preferred alternative choice this year.  32 percent of respondents stated that they will actively be pursuing opportunities in real estate debt in 2015, closely followed by student accommodation (27 percent), leisure/entertainment and healthcare (both 17 percent) and retirement living (15 percent).  

At a country level, the UK remains the most attractive market for real estate investment in Europe, selected by 31 percent of all respondents. Germany and Spain shared second place gathering 15 percent of the votes.  But, beyond the top three results, which mirror investors’ preferences in 2014, France and Italy both saw increases from last year’s results. 10 percent of investors selected France as EMEA’s most attractive market, up from just 5 percent last year.  Italy also saw an increase attracting 6 percent of responses up from 4 percent in 2014.  

Investors are also looking to take advantage of the hot market conditions by upping their real estate divestment activities with 46 percent of those polled expecting to increase sales activities. But, under pressure to put capital to work in real estate, 58 percent expect to make more investments in 2015 than in 2014.