Europe’s listed real estate sector is tipped to boost its share of the industry’s global market capitalisation.
At its annual conference in London today, the European Public Real Estate Association (EPRA) said Europe’s share of the market capitalisation of the global REIT market could rise to 18% by the end of next year, from just under 16% – or €145bn – at present.
Strong international investment flows, a buoyant IPO market and a structural change in how institutional investors manage their property portfolios have all aligned to increase Europe’s market share.
Speaking at a press conference held by EPRA yesterday, Exane BNP Paribas analyst Nick Webb said Europe’s listed sector was more diversified following more IPOs in Ireland and Spain, where new REIT regimes are now up and running.
Webb expects 2014 to be a record year for IPOs.
Investment strategy changes within institutional real estate portfolios suggest, EPRA said, a “fundamental shift” towards greater listed real estate allocations, particularly in Europe.
EPRA chief executive Philip Charls said investors had “bet on the real estate recovery story”.
“We’ve seen the strongest European property IPO market in 20 years,” he added.
“These factors have combined with new ‘state of the art’ REIT regimes in Spain, Ireland and most recently in Italy. Europe is back.”
EPRA said robust global equity markets – along with investors’ hunt for yield from strong dividend income-producing REITs – have played a key overall role in rising property stocks worldwide.
The surge of both institutional and retail investment flows into listed real estate can also be seen in the jump in global assets in exchange-traded funds (ETFs) linked to benchmark FTSE EPRA/NAREIT real estate indices.
By the end of July this year, global assets under management in equity tracker funds stood at $10bn (€7.8bn) – a 30% year-on-year rise.
Commercial real estate, EPRA said, has a “pivotal role to play” in the growth of the EU economy, according to Fraser Hughes, EPRA head of research.
Hughes said the commercial real estate sector contributed €302bn to the EU economy last year – almost double that of the automotive and telecommunications sectors.
EPRA, which teamed up with INREV to compile the Real Estate section in the Real Economy report, estimates that €235bn is invested annually in asset refurbishment and redevelopment.
The report also found that the residential and commercial sectors were “critical” if the EU’s environmental targets were to be met.
EPRA’s global sustainability rankings saw the amount of companies winning awards double this year.
