Property Investing for Non-Property Investors

Abstract

Uncertainty over the fate of the eurozone has dominated European markets over the past three years, and the real estate sector has been no exception. Investors pulled their money out of riskier property assets and opted, in large part, to make allocations to core real estate only in prime markets. Deal flow in southern Europe slowed dramatically. Opportunistic funds struggled to raise cash. Now, however, the situation is changing. Investors are considering different sectors and strategies, motivated largely by lack of yield opportunities (and liability-matching assets) elsewhere. “Our experience has been that more people are coming into property for non-property reasons. Before the crash, you had people coming and they would go into an openended fund that would track an index. Since the crash, we’ve had people look at funds with long-term inflation-linked income, such as property debt,” explains Paul Richards, principal at global investment consultancy Mercer. The year 2012 recorded unexpected interregional flows of capital into Europe, according to research from global real estate services firm Jones Lang LaSalle. This trend has continued in 2013, despite continued anxiety over the euro’s future. Net investment was up 18% in the first quarter of the year, and the firm believes capital will continue to flood into the region throughout 2013. At the same time, a report compiled by the European Association for Investors in Non-Listed Real Estate Vehicles (INREV) revealed that investors’ appetite for risk is growing for the first time since the financial crisis. INREV surveyed 65 institutional investors, 73 fund managers, and 17 fund-of-funds managers globally, and most of those investors expect to increase the share of real estate in their overall multi-asset portfolios.