Confidence in European commercial real estate is back, according to speakers at this year’s INREV conference.

However, caution was urged concerning a move away from core real estate – towards riskier assets or locations – by a number of participants at the event in Berlin.

Urbanisation, finding the right assets and, as INREV chairman Patrick Kanters said, “how to deploy the wall of money” were also issues.

Stéphane Jalbert, managing director of real estate investments at Canadian institutions PSP Investments, said: “We need to be very cautious on how we deploy money. We are focused on core locations with value-added opportunities through repositioning properties.


“We prefer to be in city centres where there’s always appetite from those looking to buy.”

For Sonya Sawtell-Rickson, senior director at Australia’s QIC, confidence has returned to real estate, but emerging markets had less appeal.


“It’s another question if confidence has returned to the wider fundamentals,” she said, adding that, so far, QIC has invested in “modestly-leveraged real estate” and moved into more value-added areas, such as debt.


Speaking on the same panel on strategies for improving markets, Peter Pereira Gray, managing director of the Wellcome Trust’s investment division, said exuberance and confidence are back and investors should “make hay while the sun shines”.
 He added: “Real estate is continuing to go up. The question is what is the right way to invest?”

Michael Bruhn, head of real estate at Denmark’s PFA Pension, said lessons could be learned from the last cycle.


He said: “The chase for returns maybe meant that there was a compromise on the quality of the assets being bought.”


With the amount of money bidding on German commercial real estate at an eight-to-one ratio according to one delegate, how to invest is now a key issue.

“The core bracket can’t widen to include non-core or value-added like it did in 2006,” he said. “So a few ticks will have to be removed from the wish list – or core property in secondary locations will have to be considered.”


Concerns that the market is ‎‎reliving 2005-07 were played down by Leon Bressler, partner at Perella Weinberg Real Estate.

“A lot of investments made so far have been made by long-term investors,” he said. “There’s less leverage around, so the r‎isk level is quite low.”


Citing Perella Weinberg’s attempts to buy in Spain, prices were high, requiring caution and a selective approach, he said.

Eastdil Secured senior managing director, Michael Cochran said: “It’s very difficult to pick up opportunities in Europe.”


Jacques Gordon, global strategist at LaSalle Investment Management, said property investors considering a sale faced a dilemma.


“It’s a great time to sell - there is no doubt about that. But then you have the redeployment issue and you have the chief executive asking where are you then going to put your money?”