GERMANY - Both German real estate company iii-investments and Invesco Real Estate see opportunities in global real estate, but especially in Europe, as the market is "nothing at all like in 2009".

iii-investments - the Immobilien-Spezialfonds arm of UniCredit and HypoVereinsbank - still sees strong demand for "commercial properties in the prime locations of Europe" and a growing "shortage of attractive investment opportunities with long-term lease contracts in very good locations".

"From a risk-return perspective the historically large spread between government bond yields and initial yields on real estate is currently a strong investment argument for institutional investors, primarily in the core European countries," noted Reinhard Mattern, managing director of iii-investments.

He pointed out that in Germany, France, Great Britain, but also Finland "this spread is up to 300 base points, which is why the run on core properties there will continue".

Another major difference to 2009 is the lack of "speculatively built new properties" coming to the market, meaning that no "strain" on the rental markets was to be expected.
Similarly, Invesco Real Estate pointed out that unlike shortly after the collapse of Lehman Bros, banks are today still "willing to provide financing for solid core real estate".

In its most recent house view on real estate markets, Invesco noted that banks remained cautious regarding riskier projects and will most likely remain so until they have "corrected their balance sheet and reduced their currently high real estate exposure" which can take up to a year.

Invesco noted that many core markets remain undervalued despite the price increase over the last months, which offers opportunities for investors.

Meanwhile, German reporting specialist IMC commissioned research company kommalpha to conduct a survey on risk assessment in the portfolios of German institutional investors.

The poll was conducted among 27 institutional investors, 59% of which insurers, 26% Pensionskassen and 15% Versorgungswerke.

Kommalpha noted that the German Spezialfonds remained the most widely used vehicle for indirect real estate exposure with 73% of the interviewed investors having one or more in their portfolio.

Regarding regional diversification, IMC pointed out that German institutional investors still remained invested mostly in Germany and Europe while North America or Asia "are still rather underrepresented".

The vast majority of interviewed institutionals are integrating their real estate holdings into their overall portfolio when it comes to risk assessment.

Only 36% are using risk deposits for their real estate exposure and another 15% are currently implementing such a risk buffer.

In general, investors see a growing need for market data for risk assessment which should either be provided by the managers or specialist research companies.