More than 70 per cent of institutional investors plan to expand their real estate share over next five years, says PATRIZIA survey

Real estate index

According to the latest research by PATRIZIA, 72 per cent of institutional investors plan to expand their real estate portfolios over the next five years. 

A total of 16 per cent of respondents intend to expand their real estate portfolios by more than 10 per cent over the next five years, while 56 per cent intend to grow their real estate portfolios by up to 10 per cent.
 
Twenty eight per cent meanwhile, expect to keep their weighting in real estate constant, with none of the respondents intending to divest from the asset class. The results reflect the sustained and growing appeal of real assets against a macro-economic environment of ultra-low interest rates and fixed income yields.
 
The survey shows that during the Covid-19 pandemic, real estate proved to be a stable investment with 56 per cent of investors reporting no adjustment to their real estate portfolios. Of those who did reallocate in response to the crisis, most adjusted exposure across real estate sectors (19 per cent), while others shifted towards lower risk strategies (8 per cent), or deferred investments (17 per cent) and increased their liquidity (6 per cent). 14 per cent turned to equities, bonds, other asset classes or infrastructure.
 
Faced with growing regulatory requirements and increasing importance of risk reporting, 79 per cent of investors see digital services as an important differentiator for real estate investment managers in the future.

Anne Kavanagh, Management Board Member and Chief Investment Officer at PATRIZIA, says: “Institutional investors are increasing their investments in real estate and they look for broader diversification across real estate sectors to ensure attractive risk-adjusted returns in the future. In the current ‘lower for longer’ interest rate environment, cash returns from real estate have proved to be an invaluable source of attractive and stable returns. Overall, real estate investments were remarkably resilient in the Covid pandemic and delivered solid returns. At the same time, the pandemic underlined the need for active management of property assets and tailored sector strategies to effectively reduce risks and drive value, which PATRIZIA’s platform is exceptionally well geared towards.”