A major survey of global institutional investors reveals ongoing confidence in real estate as an asset class, despite economic headwinds, with the majority seeing the current correction as a good buy opportunity.
Polling over 1,000 global institutional investors and 270 UK real estate professionals, international law firm CMS found that 88% of investors believe real assets are a good investment in the current economic climate, with 87% seeing the current market correction as a good buy opportunity.
The research is CMS’s 11th annual report examining investor attitudes and also incorporates a series of one-to-one interviews with senior leaders from some of the biggest investors in real estate, including QuadReal, AustralianSuper, Hines, APG and M&G Real Estate.
Despite the overall positive sentiment, investors highlight access to capital, inflation, energy prices and tenant stability as the biggest areas of concern.
Over 60% (61%) of respondents expect annual returns on their assets to increase over the next five years, with 21% anticipating broadly similar returns.
UK industry sentiment
In the UK, 76% of respondents expect the UK investment market to recover to its pre-pandemic 2019 peak by the end of 2026.
However, 88% fear that rising interest rates will negatively affect the market, with 81% afraid that inflation will have a long-lasting effect on the market.
Well over two-thirds (70%) of UK respondents say it will get harder to access debt in the next 12 months, with 60% expecting to see forced property sales as a result of refinancing and debt issues.
Sustainability findings
The survey also examined investor attitudes to sustainability against a more challenging macroeconomic backdrop.
While the vast majority (98%) of global investors believe environmental performance is important, 76% say their net zero strategy has been delayed by the economic downturn, although for most the delay is slight.
In the UK, 63% of respondents expect to achieve net zero by 2035, but only 40% say the industry is doing enough to reach net zero by 2040.
Nearly a quarter (23%) of respondents indicate they will need to upgrade at least half their portfolio to meet 2027 EPC requirements.
Meanwhile, 89% of international investors (96% UK professionals) believe that future purchasing decisions will be strongly influenced by sustainability considerations.
Commenting on the findings, Clare Thomas, Partner at CMS, said: ‘Despite the unprecedented socio-economic and structural challenges facing the real estate industry, this survey shows the appetite from global institutional investors for real assets remains unabashed.
‘While having to work harder and smarter for returns, and with the prospects for some sectors more encouraging than others, the bottom line is that every asset class appeals to the significant majority of global investors.’
