Europe's property investors still shying from risk

European real estate investors are showing little willingness to take on the greater investment risk required to move beyond the 'core property trap', according to a survey by Union Investment Real Estate.

The latest investment climate study by Union Investment found that investors remain exceedingly cautious about making compromises. There is still no sign of the anticipated switch to more profitable and therefore higher risk investments - either inside or outside of Europe.

For the study, market research institute Ipsos surveyed 150 investment decision-makers from real estate companies headquartered in Germany, France and the UK.

'Safety-oriented property investors in particular need to consider alternative investment strategies in the wake of the financial crisis. Avoiding risk by focusing exclusively on the best properties in the best locations can involve falling into a trap,' said Reinhard Kutscher, chairman of the management board of Union Investment Real Estate.

Around two-thirds (65%) of the real estate investors questioned stated that the European financial crisis has had a significant impact on their investment strategy. Unsurprisingly, concentrating on the Western European core markets (57%) was one of the major strategic changes made or planned for the next 12 months.

'Core properties in sought-after European markets are expensive, though. Very high entry prices are the high-risk flipside of an inflexible risk-avoidance strategy,' commented Kutscher.