The good news is that new sources of capital, from South Africa to Canada, from the US to Australia, and from Asia to the Middle East, all driven by the need for diversification, are targeting European real estate, PropertyEU's Global Capital Flows Investment Briefing has heard.
Experts gathered for the briefing, hosted by Colliers International in London this week, painted a complex picture of domestic funds, foreign institutions, opportunistic money, family offices and a second wave of Chinese investors, all keen to find opportunities in European real estate.
'The long-term investors like the Chinese are still there and the new entrants from different countries are quite numerous, have longer-term horizons and are eager to diversify,' said Makato Fukui, director of strategic partnerships at Schroder Real Estate Investment Management.
Chinese companies are taking varying approaches, said David Ryland, partner at Paul Hastings Europe: 'Chinese insurance companies need lengthy approval times to invest in Europe, but we are now seeing a second generation of Chinese investors coming in and being very active. We are now at the final stages of disposing of a large portfolio and it is interesting to note that the last seven bidders are all from China.'
The Chinese are particularly interested in continental Europe, because many investors already have a London or UK portfolio and are now looking to diversify.
'There are mixed messages from China: some are adopting a wait-and-see attitude to Europe, a big player like Ping An is choosing to invest in the US rather than Europe but there is a second wave of state-owned enterprises and private wealth that is being very active in Europe,' said Richard Divall, head of cross-border capital markets, EMEA at Colliers International.
Big sovereign wealth funds from the Middle East are also still very active, said Will Rowson, partner at Hodes Weill & Associates: 'They have so much money from investments made 10 years ago, that regardless of the low oil price they have capital to invest.'
With so much capital chasing opportunities, where can it go? Germany is an obvious destination, but investors are aware that the market is extremely competitive and local investors are very strong. Paris is always interesting but there are concerns over lack of growth in France. Italy and the Netherlands are interesting but quite small markets, while the Nordics are attracting more and more attention. Some investors are very keen on CEE but others are wary of liquidity issues. All in all, said Divall, 'it is a tough call for investors who have to choose where to put their money.'
