Global real estate adviser CBRE’s annual survey of European Investor Intentions ahead of MIPIM has revealed significant evidence of improving investor sentiment – both in terms of expectations around investment activity levels and the range of assets that investors will consider.
A clear majority (58 per cent) of respondents said they expected their purchases in 2013 to be higher than in 2012. This compares with 45 per cent giving the same answer last year. Within this, 30 per cent of investors expect to be spending over 20 per cent more on investment purchases in 2013 than they did in 2012. The proportion of investors intending to spend less this year than in 2012 dropped to just six per cent; the comparable figure in the 2012 survey was 18 per cent.
Further evidence of increased investor demand in European markets is given by the finding that 71 per cent of survey respondents expected to be net investors with purchases exceeding sales. Again this is a stronger picture than last year when 61 per cent of respondents indicated they would be net investors.
Respondents were also asked to rate their preferences across four types of asset of different quality and risk characteristics, indicating which they considered “most attractive” for purchase and being able to select more than one. The order of investor preferences by asset type was the same as in the 2012 survey but with different weightings.
Prime/core properties were selected by a majority (53 per cent) of respondents as most attractive, a higher proportion than in 2012. However, there were larger increases in the proportion of investors indicating that “good secondary” and “opportunistic/value-add” assets were most attractive, in both cases rising to over 40 per cent. The proportion favouring distressed assets was virtually unchanged at 22 per cent.
These results indicate that, while there is still a bias towards prime/core assets, there is now significantly greater interest in opportunities further up the risk spectrum. This could reflect investors’ need and willingness to consider a broader range of assets as prime/core markets have become crowded and, in some cases, more expensive. It could also reflect an increase in risk tolerance with more positive investor sentiment generally in response to reduced uncertainties over the eurozone.
The conclusion that there is now growing investor interest outside prime/core assets is supported by the pattern of responses on the “single most preferred” type of asset for purchases in 2013. Prime/core assets got the highest vote (42 per cent), but a majority of respondents overall chose other asset types. Good secondary and opportunistic/value-add assets were each selected by 25 per cent of investors as their most preferred asset type for purchase.
Peter Damesick, chairman, EMEA research, CBRE, says: “The findings of this year’s survey reflect a more positive tone in investor sentiment. The responses clearly imply that investors are looking to commit more capital to European real estate in 2013 and there is potential for increased transaction volumes in the coming year. The implication is also that the trend towards greater investor interest and activity in secondary assets, evident since the final quarter of 2012 in some European markets, will gather pace during 2013. The next 12 months could mark the beginning of a reversal of the strong polarisation that has characterised European property investment markets over the past two years.”