Germany ousts UK as preferred investment location: INREV

Germany has overtaken the UK as the preferred location for investment in non-listed real estate funds, according to INREV’s 2011 Investment Intentions Survey.

German retail was selected by 36% of investors as their preferred location and sector, signalling a marked shift in approach from 2010, when German retail failed to reach the top 10. In contrast, the UK is now seen as less attractive than the German, French and Nordic markets.

'This is a dramatic change in sentiment. Over the last two years the UK dominated the rankings with UK retail, UK office and UK Industrial/Logistics included in the top four most preferred country/sector combinations.

While the UK remains well represented in the top 10, investors seem wary of higher property prices and a slower economic recovery in the UK but attracted by growing confidence in the German and other European markets,' said Lonneke Löwik, Director Research and Market Information.

The survey, which captures insights from investors, fund of funds managers and fund managers, reveals a cautiously optimistic outlook for 2011. Nearly 70% of both investors and fund managers noted adequate supply of investment products and interest in their preferred markets, reversing perceptions from the 2010 survey. There is also a perceived improvement in the ability to raise capital, with 50% of investors and 58% of fund mangers rating this as less of a problem than in previous years. However, 80% of fund of funds managers and fund managers still see capital raising as a significant challenge.

Appetite for the non-listed real estate sector has increased over the last two years with over half of respondents intending to increase their allocation to the non-listed sector. Access to expert fund managers and the importance of risk/return ratios are seen as key influencing factors. Changing perceptions of risk In terms of investment strategies, 90% of investors are expressing a preference for a single country strategy - an increase of 13 percentage points on 2010. Almost 90% of investors also prefer a single sector strategy.

'These statistics suggest that investors believe that possessing a deeper understanding of a particular location or sector could be less risky than the benefits of diversification through a multi-country, multi-sector strategy,' Löwik said. She added: 'Given the general economic turmoil of the last two years and the increasing levels of regulation, we might have expected less than positive investor sentiment. However, our 2011 Investment Intentions Survey indicates encouraging signs about investor confidence in the non-listed real estate sector.