Institutional investors across the globe are increasing their allocations to real estate and intend to spend €42.5bn this year, according to research by INREV, ANREV and PREA.
Investment in real estate will continue rising in 2015, reflecting market stabilisation, says the associations’ joint global Investment Intentions Survey.
The trio’s research project found that nearly 46% of investors plan to increase allocations to global real estate, with €42.5bn being set aside for this asset class this year.
Last year, market participants planned to allocate just under €35bn.
Figures indicate ongoing interest in real estate from investors in Europe, Asia Pacific and North America, with total allocations anticipated to rise to 11.3%, from 10.8%.
INREV, the real estate fund association for Europe, has been carrying out its the survey since 2007 but last year teamed up with ANREV and PREA – its counterparts in Asia and the US, respectively – to provide a more global perspective.
Henri Vuong, INREV’s director of research, said: “This year’s survey is broadly consistent with the predicted and actual investment trends we’ve seen over the past couple of years.
“It’s a case of investors chasing dependable returns through real estate in an otherwise unexciting investment landscape.
“But we can’t ignore the cyclical nature of real estate – what the survey shows us could also be reflective of a market enjoying a period of calm before the storm.”
Growing allocations are being “driven largely” by investors from Asia Pacific that expect to increase current allocations from 9.8% to 11% this year.
Their counterparts in North America and Europe will increase allocations from 8.6% to 9.1% and from 12.3% to 12.6%, respectively.
Europe is set to enjoy continued interest, with 45.1%, or €19.2bn, of anticipated total allocation pointed towards the Continent.
Germany, the UK and France remain the top three investment destinations for all investors.
Non-listed real estate funds are seen as the preferred route for investing in Europe, the survey found.
Italy also attracted attention, jumping three places from last year to become the eighth preferred target destination.
Turkey, however, dropped off the list of top-15 target destinations.
Offices – and German offices in particular – are a key target, displacing German residential, which occupied one of the top-10 country and sector slots last year.
In Asia, ANREV estimated there would be an influx of $58.5bn (€50.5bn) this year.
Investors, it said, intend to further increase their portfolio weightings to real estate, with the average allocation to Asian real estate expected to rise to 11.3% from 10.8% currently.
ANREV said that, regardless of domicile, investors, fund managers and fund-of-funds managers’ main reason to invest in the sector was the diversification benefit from a multi-asset portfolio, followed by the prospect of enhanced returns.
“The benefits of investing into real estate continue to attract capital from investors,” ANREV said, estimating that, over the next two years, 59.4% of Asia Pacific investors are expecting to increase their real estate portfolio allocation, higher than the global average of 45.8%.
Tokyo, Sydney, China’s tier-one cities and Melbourne were top picks for investors.
More than two-thirds of investors in Asia Pacific will invest in their own region.
However, ANREV pointed to demand for geographic diversification, with an increase of around 20% planning to invest outside their region and more than half targeting Europe and North America.
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