European property investors continue to steer clear of risky investments and remain focussed on safe bets, according to Colliers International's 2011 Global Investor Sentiment Survey released on Monday. The survey, which was carried out in the first two weeks of August, found that 57% of European investors were not prepared to take on more risk compared with the start of the year and continued to seek out core product.
European property investors continue to steer clear of risky investments and remain focussed on safe bets, according to Colliers International's 2011 Global Investor Sentiment Survey released on Monday. The survey, which was carried out in the first two weeks of August, found that 57% of European investors were not prepared to take on more risk compared with the start of the year and continued to seek out core product.
However, available stock remained a concern with 49% of investors reporting the supply of 'for sale' property remained a key barrier to expansion and over 54% stating they were focused on core property with target IRRs of five to 10 per cent. Only 43% of European investors report any increase in risk appetite since early 2011, compared to 46% globally, and 64% in Canada where investors show the biggest uplift in risk appetite.
Globally, around 71% of respondents said they were more than likely to look to expand. But, as in Europe, the biggest concern for global investors was whether there was enough property up for sale to enable them to meet their expansion plans.
'Given the continued aversion to risk and the recent investment trends in Europe, we continue to see investors demonstrating a strong preference for acquiring offices in London and Paris; closely followed by German retail property in general and offices in Hamburg,' said Ewen Hill, director of international investment at Colliers International UK.
The cost of finance for real estate investment has shown no signs of improvement, with 41% of European investors actually reporting a rise in financing costs and 44% stating they had seen no change. In contrast, 68% of investors surveyed in Canada reported that the cost of debt had fallen.
In terms of the occupational cycle, 40% of European respondents reported demand is rising and headline rents are beginning to increase. Looking ahead, almost two-thirds of European respondents said they expected the cycle to have improved in 12 months’ time. That said, investors are not overly bullish on rental growth, with two-thirds taking the view that rents will be unable to outpace inflation over the next five years.
