Amid the recent political upheaval in the UK and France, some things have – comfortingly – remained the same in our real estate patch.
Blackstone has become almost predictable with its record-breaking deals and mammoth fund raises in recent years and in early June, it extended its track record with two coups in as many days. Hard on the heels of the long-awaited sale of Logicor followed the acquisition of Helsinki-listed Sponda and in the same week Blackstone closed its fifth European fund, its largest ever.
Deals and capital raises are natural pairs, just like Blackstone and big numbers and the US private equity giant dominates this particular arena. But it is not the only big deal machine in Europe as KKR’s recent €3 bn takeover of Dutch car park provider Q-Park displays. Billion-euro deals are becoming the order of the day for our editorial team and significantly lifting overall investment volumes.
The Continent stands to gain the most from the trend as international trophy hunters continue to target key European capitals to meet their real estate allocations, pushing net initial yields in the office sector ever lower. Competition has pushed prime yields towards 3% in Paris, Munich and Berlin in Q1 2017, well below previous record lows, according to advisor JLL.
Europe takes over momentum from UK
In that sense, Europe has taken over the baton from the UK and industry experts expect that trend to intensify. More institutional investors will likely allocate capital for real estate to continental Europe rather than the UK following the unexpected outcome of the country’s recent elections, Jos Short, chairman of London-based Internos Global Investors, told PropertyEU.
As if on queue, data provider Preqin published new figures for the largest global institutional investors with $1 bn (€0.9 bn) or more allocated to private real estate.
Dubbed the ‘Billion Dollar Club’, the group of 433 investors has seen its combined assets under management rise 15% since 2014, Preqin said. While this investor group accounts for only 13% of the total number of institutional investors in the asset class, their share of the institutional capital allocated to the industry now amounts to 84%, or $39 tln (€35 tln) in AUM.
And while every geographic region is set to be targeted by a greater proportion of ‘Billion Dollar Club’ investors in the next 12 months compared to other investors, Europe is a particular focus, with 62% of the investor group citing the region as a target. That is another big number.
