Savills, the London-listed property services firm, has a published a list of preferred property sectors for investment at this point in the market cycle, at this year’s MIPIM conference in Cannes.
In an announcement, the firm included prime European high streets and shopping centers as well as green offices and student accommodation among its safer investment options. It suggested investors accept the risks inherent in investments in more traditional asset classes in secondary markets as well as alternative assets like healthcare property too.
Grouping strategies into two categories: more opportunistic ‘risk embracers’ and more secure ‘risk avoiders’, the firm predicted that these types of investments would have greater traction with investors than before.
Savills added that there would be a more even spread of investments across property types and markets in 2016 than previously as investors continue to seek higher yields than are available in other asset classes.
Marcus Lemli, head of European investment at the firm, said: “European commercial real estate remains one of the best places for investors to earn a healthy yield and we anticipate total investment volume to grow between 3 percent and 5 percent in 2016.”
He added: “Investors, however, are looking to actively diversify their portfolios and therefore volumes are likely to be less concentrated in a handful of key locations, and spread more evenly across the continent this year. For both the opportunistic and the cautious investor there are multiple opportunities available – often within the same city.”
In terms of ‘risk avoiders’, Savills advised investors to seek: shopping centers in prime cities; prime green offices in ‘smart cities’; pan-European e-commerce logistics; prime high streets in tourist cities; and student housing in markets with rising international student numbers.
It listed as ‘risk embracers’: healthcare in France and Germany; offices in Central and Eastern Europe; micro apartments in top and second tier cities; high performing shopping centers in fringe, recovery markets; and public assets in markets where governments are forming public-private partnerships.
The list is another indicator of how traditional, prime real estate has reached a cyclical high point. This is prompting investment managers and advisors to consider alternative or higher risk and return strategies for their investors as they attempt to help them locate stronger returns than would be available in fixed income products, and less volatile returns than are being demonstrated currently in the world’s equities markets.