Increased competition and yield compression in major office, retail and logistics markets are bringing other sectors – and more peripheral geographies – into the limelight.

Expo Real in Munich, historically an event for mainstream investors, this year raised more questions than answers. With so much capital still on the sidelines, where can it go? With prime yields down to eyebrow-raising levels, can less mainstream sectors provide more value? And how alternative are certain sectors?

IP Real Estate could buy its own diversified alternatives portfolio if it earned a euro for every mention of the “wall of capital”. But with the US likely to be the first to increase interest rates, the relative value of real estate investment could be called into question. With Asian investors typically dollar-denominated, a simple switch back to US bonds should not be ruled out, one observer noted, with European commercial real estate potentially the loser.

Macro worries were met with equal doses of acceptance and derision. The old adage that Germany produces and France consumes was up for discussion; wobbles in both economies were the talk of the trade halls.

For now, however, Europe remains a major draw for North American and Asian capital. Canadian investors and their US counterparts continue to target European property. In the UK alone, US money has dominated investment this year, with some €8.3bn spent in the first nine months of this year, according to Real Capital Analytics.

Attended by 36,000 people this year, Expo Real acts as a handy barometer of current market sentiment while providing insight into the behaviour of the sector. The sight of Europeans queuing up to give their business cards to the handful of Asian investors who made the trip to Munich was just one example of the eagerness to build bridges. One German investment manager told IP Real Estate that he had escorted an Asian delegation on an impromptu guided tour of the Bavarian capital. Institutional and private money is coming – educating it on the intricacies of European real estate is another matter.

As Christina Gaw of Gaw Capital Partners told an Expo Real panel, Asian investment in European property is still in its infancy. Their acquisitions at yields that many European investors regard as absurd was simply a case of relativity. That infancy, Gaw added, meant that few steps had been taken beyond prime post-codes and into regional real estate or, indeed, into alternative sectors. Gaw did not rule out such moves in the near future, however.

According to TIAA Henderson Real Estate, which has made some big conclusions about the impact of demographic change on real estate markets, the beginning and end of adult life (in other words, student housing and retirement homes) are potential growth sectors. Both sectors – which have already attracted institutional capital in this cycle – may find themselves reclassified as mainstream.

It might be too early for the Munich trade halls to roll back their hangar doors for aircraft and aviation, but the leasing of passenger planes is nevertheless a real asset – KGAL, a German real estate player, certainly seems to think so.

Planes may be in vogue, but so too are Christmas trees. Michael Schönach, CEO of Northern Horizon Capital, sees value in the sector – targeting Danish farms and pointing out their potential for favourable returns. Investment in the seasonal product comes alongside a focus on care-homes for the Helsinki-based investor.

But before festive investors start boarding planes for Lapland, there are still “pockets of opportunity” for large-scale investors in more traditional sectors. 

One major US fund manager is well on the way to raising capital for a targeted, opportunistic approach to old Europe’s so-called big-three sectors. Offices and shopping centres with vacancy or in need of refurbishment still offer opportunity. That may be where the vast majority of investors continue to play for the time being. 

How long that remains the case is anyone’s guess.