The latest investment intentions survey by real estate associations ANREV, INREV and PREA has revealed an increased risk appetite and highlighted the extent to which institutional investors are tilting portfolios away from offices and towards industrial assets.
The 60 organisations surveyed, which include some of the world’s largest real estate investors, such as APG, Allianz Real Estate and Mass PRIM, plan to invest €76.6bn in global real estate markets this year.
More than half (57%) of respondents indicated a shift in preference towards value-add strategies – the highest level since 2008 – while only 30% preferred core strategies, down from 50% last year.
For the first time in the history of the survey, investors selected industrial/logistics as a single top sector choice at 71% when investing in Europe, placing it ahead of offices and residential, both on 69%.
Industrial/logistics was the only sector to surpass its seven-year average score (67%), while office and retail were down 15% and 23%, respectively, on their long-term averages.
And although the office sector is the largest component of existing real estate portfolios, it only represents 20% of capital earmarked for new investment this year.
Investors in Europe and North America identified the diversification benefits of real estate in a multi-asset portfolio as the main reason for investing in the asset class. For those in Asia-Pacific, the key attraction was real estate’s ability to enhance portfolio returns. Inflation hedging was ranked as the least important factor in all regions, despite the current increase in inflationary pressures.
INREV said ESG was set to be a key factor in investment decisions in 2022, gaining momentum across all regions. The survey found that 68% of investors consider a net-zero carbon commitment to be an important feature when investing in non-listed real estate funds, and 86% of investors surveyed pay close attention to funds’ environmentally and/or socially responsible investments.
Iryna Pylypchuk, director of research and market information at INREV, said: “The 2022 Investment Intentions Survey is a powerful reminder of the investment appeal of real estate as an asset class, with the diversification benefit it offers in a multi-asset portfolio remaining the key driver of growing allocations.
“It’s a helpful indicator of how and where investors plan to allocate new capital, highlighting broadening in geographic and sector preferences, especially amongst European investors, beyond core markets such as France, Germany and the UK.”
She added: “The latest results reveal intriguing shifts towards value added strategies as well as the growing importance of ESG considerations, prepping the global real estate investment industry for an interesting coming 12 to 24 months.”