As Chinese capital becomes increasingly Asia-focused, new investors from different parts of the world are seeking to invest in European real estate, delegates heard at the PropertyEU Global Capital Flows Briefing, which was held on Wednesday at Colliers International’s headquarters in London.
‘Other sources of capital are becoming more active in Europe,’ said Damian Harrington (pictured), director, head of EMEA research at Colliers International. ‘We are getting more investment from South Africa, Australia, Canada and Japan. Meanwhile Chinese investors, due to changes in capital controls, are investing more money in Asia.’
China and the US dominate the list of top global destinations for real estate investments, with the UK and Germany following at a considerable distance. The only other European countries that make the rankings are, in the following order, France, the Nordics, Benelux and Spain, according to Colliers data.
Another global trend that is affecting Europe is the increasing importance of big players. In the list of the top investors in the world again the Chinese dominate, followed by the US, while Merlin Properties is the only EMEA investor that makes the top 20. ‘Compared to 10 years ago, what is remarkable is the different composition of investors, with a lot less banks and more developers in the picture,’ said Harrington.
The big are getting bigger
‘Our industry is being dominated by huge players,’ said Jason Oram, partner, head of Southern Europe at Europa Capital. ‘Our investor pool has contracted significantly in number, but the amounts committed have increased enormously.’
There is so much capital waiting to be deployed, that even political concerns gets overlooked. ‘We are getting used to political risk,’ said Harrington. ‘Geopolitics is not having an impact on how much capital is being raised. According to our research, for every dollar spent there are about 5 dollars waiting to be spent.’
The ever-bigger wall of capital is chasing a finite, and indeed diminishing, number of opportunities. ‘There are huge increases in allocations to real estate, it's a massive shift on a global scale,’ said Oram. ‘But the investable stock has not increased. In future, a lot of stock that is now not classified as investment grade will have to come into the arena.’
Shortage of product means that foreign investors’ expectations are often not being met. ‘We are seeing a lot of frustrated capital in Europe, seeking access,’ said Oram. ‘Now more than ever, targeting is not getting.’
Behaviour has changed, reflecting that widely-felt frustration, said Michael Walton, chief executive, Rynda Property Investors: ‘There has been a real shift from growth to yield, a rapid change in an industry that is supposed to be slow-moving. In the European context now there is a real focus on income.’
