European real estate investors anticipate 3-5% annualised return

Of these, 25% calculate a target return of 3-4%, 30% indicated 4-5%, while 20% set an annual return of over 6% for new investments.

The study indicates that 60% of European real estate investors expect it will take more than 12 months for the transaction markets to pick up again, while for 37% it will happen within the next twelve months.

Martin Schellein, head of investment management Europe at Union Investment, commented: ‘The pricing phase on the European real estate markets is still in full swing. Whether the calculated returns can also be achieved in this way remains to be seen. We observe that the price expectations of sellers and buyers do not yet match in most cases. No clear market evidence can currently be derived from the sharp decline in fragmented transaction activity.’

Among European real estate investors, 31% have adjusted the self-imposed return targets of the real estate portfolios downwards, 26% upwards, while for 39% there is no change. However, 60% claim they will still not reach these targets in the next three years.

More than half want to wait and see in the coming 12 months and hold their properties or even make new investments.

For 25%, the focus is on holding their properties, for 27% on buying and for 39% on selling.

However, the investment strategies differ from country to country. While in Germany (55% of respondents) and France (39%) the focus is more on sales in the coming twelve months, in the UK the investment strategy is on wait and hold (52%), with only 21% of the UK investors surveyed betting on sales.

The overall feeling on the European real estate markets remains subdued. While the real estate investment climate index calculated by Union Investment rose by 2.4 points to 61.3 in Germany in H1 2023, it fell in France by 2 points to 59.3, while in the UK it dipped 0.7 points to 59.6.