Investors in European real estate still need to tread carefully. That was the view at MIPIM this week where an abundance of equity raised the questions: Where – and when – to spend it?

Despite rising optimism for the continent’s commercial real estate sector, Hermes Real Estate fund management director Ben Sanderson urged caution. Speaking on a panel hosted by Amundi Asset Management, Sanderson said: “There are still a lot of challenges in Europe – we’d be deluding ourselves if we think all is okay.”

Sanderson said the UK, for example, had experienced little rental growth over the last 30 years. As a lender, Sanderson said debt, with returns of 4% to 5%, was a better play than direct real estate.

Voicing a preference for UK secondary markets and Germany, Adam Cibik, portfolio manager at the Employees Retirement System of Texas, said there was still relative value in Europe, which was “half a cycle behind the US”. With Spain the “flavour of the month”, Cibik said there was a risk of raising investors’ expectations too high.

When compared with Asia – a significant source of money – Europe still offers value. Citing the example of Taiwan, Gordon Marsden, DTZ director of investment and advisory in Asia Pacific, said: “With yields as low as 2.5% in their home markets, everything in Europe looks comparatively cheap.”

Almost 80% of respondents to a PwC/Urban Land Institute report predict that capital from Asia will rise this year.

Optimism for European property could lead to 2014 being the “last chance” to invest, said PIMCO Europe’s head of commercial real estate Laurent Luccioni.