GERMANY - German institutional investors will invest more than €300m on average in real estate this year and more than €26bn in total over the next three years, according to two separate studies.
Ernst & Young's latest trend barometer estimated German pension funds and insurers would invest €300m on average in real estate this year, with 44% going into indirect vehicles.
Separately, the European Association for Investors in Non-listed Real Estate Vehicles (INREV) has predicted real estate funds will see net inflows of as much as €8.1bn between 2010 and 2013.
According to INREV's Investor Universe Germany Survey 2010, German institutional investors' existing exposure to real estate - at €59bn in aggregate - is below their target level of €84.7bn.
The study concluded that, if investors exploited their current full real estate target allocations, an additional €25bn would enter the market, supplemented by a further €1.2bn from increased allocations.
Roughly a third of this capital would be direct to funds, INREV predicted.
Lonneke Löwik, director of research and market information at INREV, said: "German investors are open to invest in non-listed vehicles, but, together with joint ventures, they currently serve as supplements to direct portfolios.
"Direct real estate remains the largest component, but there will be some shift in this trend as we see a reduction in direct domestic exposure and an increase in non-listed funds, such as through transferring assets to Spezialfonds."
The German real estate universe is dominated by life insurance companies, which hold around two-thirds of total assets.
This is followed by pension schemes for professional occupations, at 16%, and other insurance companies, at 13%.
INREV highlighted pension funds only hold a small share of the real estate universe because of their size, rather than investment appetite.
The study found that, on average, the real estate exposure of German institutions was 5.4%, with pension schemes for professional occupations boasting the highest real estate exposure at 14% and other pension funds at 10%.
Löwik added: "Domestic investments are the focus of real estate portfolios of German institutional investors, accounting for around two-thirds of total real estate.
"Despite this domestic focus, the majority of investors are exposed to non-domestic real estate.
"Non-listed is the preferred route to invest internationally, representing around 77% of investors' non-domestic real estate portfolios. This compares to 23% of domestic real estate and 28% overall."
The Ernst & Young study also found nearly 90% of German investors want to invest in core properties in their home market, while 75% also favour the established markets in Europe.
Approximately a quarter of respondents are looking to divest their North American investments, expecting further price corrections in the US market.
 

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