EUROPE - Investors including pension funds should focus on direct investment in European commercial real estate as a lower-risk alternative to volatile Reits, according to Seven Dials.
The fund manager said high yields in mainland European markets would continue to attract investors seeking to reduce their risk and it claimed to see a rise in investment in bricks and mortar – in contrast to a recent 30% drop in Reits.
The firm last week urged investors in pursuit of geographical diversification to look to mainland Europe rather than higher-risk global markets.
"The danger is that investors are lured by the more risky, emerging markets too early in their hunt for higher returns," it said in a statement.
Seven Dials director Simon Critchlow also told IPE Real Estate: "Investors are actively looking further afield – some towards global diversification, others towards specific markets in Central and Eastern Europe. The issue is topical."
According to the fund management firm, economic growth and strong business confidence underpinned the case for investing in European commercial property
It claimed the €1.1trn Eurozone real estate market was "radically different" from the mature UK market – both in size and because relatively less transparency allowed active managers to exploit inefficiencies among "a series of relatively immature and not-yet fully inter-connected markets".
"Acquiring the property is just part of it. A large part of the value comes from the management team behind it," said Critchlow.