Wealthy private investors from across the world are putting more money into the European real estate sector, adding to and in some cases replacing traditional institutions and sovereign wealth funds, experts have agreed at the PropertyEU Global Capital Flows briefing in London.
‘We are seeing more private money being invested for the long term, it is an important and growing trend and a significant opportunity for the property industry,’ said Pertti Vanhanen, global head of property at Aberdeen Asset Management. ‘The shift from pension funds to private money is not happening overnight but it is long-term. These are serious investors who are raising money to invest with a ten-year horizon.’
Private investors and family offices are looking for places to invest their money and, given equities’ volatility and bonds’ flat or negative returns, are becoming increasingly interested in the property sector.
The UK, as is often the case, is leading the trend, as it remains one of the most transparent and easy to enter markets in the world. This was noticeable in the different reactions to the shock referendum result. ‘In the UK many institutions are sitting on their hands waiting for clarity, but any gap that might have emerged after Brexit has been filled very quickly by private money,’ said Will Rowson, Partner at Hodes Weill & Associates.
‘We are seeing a lot of family office money rather than institutional money flowing into the UK market, especially from countries in Asia like Thailand and Singapore but also from the Middle East,’ said Richard Divall, head of cross-border capital markets, EMEA at Colliers International. ‘They look at London and see cheaper prices, a currency advantage, good quality assets and a great deal. The opportunistic money from the US is looking more at continental Europe now, with Italy a particular focus.’
Capital flows will stay in flux for some time, given geopolitical uncertainty, the full Brexit effect still to be felt and the big question mark of the US presidential elections in November. ‘At this mature stage of the cycle, investors are more concerned with geopolitical risk,’ said Divall.
Investors’ strategies are different depending on their type, strategy and time horizon. While some institutions are choosing to take money out at this stage, many more private investors and family offices are making sure there is still a lot of money going into the property sector.
‘There are more inflows than outflows but a lot of activity both ways and a positive outlook for real estate,’ said Vanhanen. ‘‘We need to tailor our offering to these new private investors. For example, it is likely there will be more demand for closed end funds.’
