A new survey carried out by European third-party management firm Carne reveals considerable optimism in the future of the European real estate market, with eight out of 10 property fund managers expecting new capital inflows to increase substantially in the near future.
According to the Straight to the Point: Real Estate report, which includes a survey of 25 real estate fund managers representing some $300bn (€260bn) in assets, around 36% of asset managers believe the rise in capital inflows will be meaningful going forward due to an improvement in the lending and transactional markets.
Fund managers remain upbeat, with 92% expecting more fund launches and 72% targeting the UK for their liquidity and diverse opportunities. They are also forecasting a return of institutional capital into real estate, with institutions attracted by stabilising borrowing costs and property values.
Des Fullam, chief regulatory and client solutions officer at Carne Group told IPE Real Assets: “European private real estate is experiencing something of a renaissance. Historically, investors in European real estate were looking to diversify away from concentrated US real estate exposure, typical of many global real estate funds.
“Today, given the macroeconomic data, specifically growing GDP paired with declining unemployment across many countries in Europe, some other relevant demographic and social shifts are taking place which will support more investment in European real estate going forward. Europe is benefitting from a concern that investment is over concentrated in the US and heightened uncertainty in the US has caused investors to focus on this risk.”
Given the positive outlook, some investors are predicting that European real estate may outperform US real estate looking ahead. The industry’s path to net zero means Europe is seeing major investment in retrofitting projects, with the chance to fund greener buildings. As employers have started encouraging workers back to the office, the number of office vacancies is in decline, and tenants are seeking versatile spaces that meet today’s more hybrid approach.
There are also significant opportunities to invest in residential housing as governments strive to increase the supply of affordable new homes, said Fullam.
“The development of affordable housing cannot be met from the public sector alone and European governments including the UK are looking for support from private markets.”
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