European investors stay close to home in 2010: CBRE

Most European real estate investors will target their domestic markets in 2010, although interest in Asia and the US will remain strong, according to the results of a new survey by CB Richard Ellis (CBRE) which was presented on Wednesday at Mipim in Cannes. In the survey of over 270 investors, 60% identified Europe as their primary geographic target, while the remainder identified other regions as offering the best buying opportunity. Asia is preferred by 21% of respondents, while 12% see North America as the most attractive place to purchase real estate in 2010.

The European preference is not surprising given that the vast majority of respondents are based in, and predominantly invest within, the region, commented Nick Axford, Head of EMEA Research and Consulting at CBRE. 'However, it is noteworthy that 40% see the best opportunities laying elsewhere, with Asia a clear target for many.' Raymond Torto, Global Chief Economist for CB Richard Ellis, said the results echo findings from elsewhere in the world. 'A similar survey of comparable size in the US recently found that 58% of US investors were domestically focused, with 16% preferring Asia and 12% targeting Europe.'

Torto said there were some key differences in the sector preferences between European and American investors. 'Whilst European investors clearly favour the office sector followed by retail, US investors are currently most attracted by the residential sector; the office sector ranks only third.'

Interestingly, with economic recovery more firmly established, US investors also have a slightly different strategic focus. There is a much more even split between investors who are prioritising value-add purchases and those focussing on prime, core acquisitions. Torto believes that US investors are less concerned about the prospects of a 'double-dip' recession (which emerged as the primary concern for European respondents to the CBRE survey), but that they clearly still believe that the recovery will be protracted. Nevertheless, this has meant that more players are looking to take advantage of attractive pricing in the secondary areas of the market.

Elsewhere, the resurgent Asian market is seeing a strong rebound in both transaction volumes and pricing as investor confidence returns, underpinned by a solid bounce back in the equity markets, the persistence of low financing costs and a stabilising trend in price levels across key markets. Direct real estate investment in the region jumped 56% year-on-year in the second half of 2009 to an estimated $25 bn, with China, Hong Kong and Taiwan accounting for 57% of total investment volume in the period. 'Local buyers and domestic real estate funds have been dominating transaction activity in recent months, but core international institutional investors are beginning to return to Asian markets in light of the ongoing market rebound,' commented Andrew Ness, Head of Asia Research at CBRE.

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