The foreign investors who have been piling into European real estate have different objectives and strategies, but they all have good reasons to keep investing, an expert panel agreed at Property EU’s Global Capital Flows and Investment Opportunities Briefing, which was held in London this week.

The foreign investors who have been piling into European real estate have different objectives and strategies, but they all have good reasons to keep investing, an expert panel agreed at Property EU’s Global Capital Flows and Investment Opportunities Briefing, which was held in London this week.

Competition is intense as US private equity firms, Canadian pension funds, Asian and Middle Eastern sovereign wealth funds, new money from Turkey to India and global REITs all seek exposure to European real estate. But different styles of capital target different opportunities in different countries, said Jonathan Hull, managing director of EMEA capital markets at CBRE. ‘US money tends to go into value-add, while Asian investors are looking for long-term investments,’ he said.

The most significant development in the last year has been the rise of US capital coming to Europe,’ said Hull. ‘It is €20 bn, four times the amount of Asian capital. Asian names have grabbed the headlines because US money tends to come into funds and not directly into real estate, but US funds are more important.’

The panel agreed that the slowdown in the Chinese economy and this summer’s stock market crisis will not slow the flow of Chinese investments into European real estate. Quite the opposite: ‘There is even more pressure on Chinese and Asian capital in general to diversify,’ said Thomas Beyerle, group head of research at Catella. ‘We can expect more money than ever looking to invest in European real estate.’

China is still investing little in the sector, comparatively speaking, so the potential for growth is significant. ‘Chinese investments will definitely increase as there is more need than ever for diversification, and there is the perception that the government is encouraging overseas expansion,’ said David Ryland, partner at Paul Hastings Europe.

‘I have no doubt that Asian announcements will turn into solid investments this year,’ said Will Rowson, partner at Hodes Weill & Associates. ‘We are actually hiring a Chinese specialist because we expect the market to grow further.’

One trend that has emerged recently is for foreign investors to gain exposure by directly buying a company rather than buying a portfolio, delegates heard. ‘It is a sensible way to get into a sector, and you also buy into their expertise so it is a double bet,’ said Rowson. ‘We are seeing this more and more as a model that works for Middle Eastern and Chinese investors that want to increase their exposure to real estate,’ added Ryland.

The one sector that could be affected by Asian market jitters is high-end residential, as private investors that have been affected by the fall in equity markets could pull out. ‘London is the epicentre of my worries,’ said Rowson. ‘There is an awful lot of resi being built with Asian investors in mind and if that demand withers it could be a problem: who is going to buy it?’