Investors selected industrial/logistics as a single top sector choice at 71% for the first time in the history of the Investment Intentions Survey published by Inrev.
When investing in Europe, investors placed logistics ahead of offices and residential – both on 69%.
Logistics was the only sector in Europe to surpass its seven-year average score (67%), with growth likely coming on the back of excellent performance results for the sector driven by increased demand for logistics space during the Covid-19 pandemic. This is in sharp contrast to offices and retail which were 15% and 23% down from their long-term averages, with the remaining sectors more or less on par. Retail climbed back up from fifth to fourth place at 36%.
Conversely, while the office sector is the largest component of existing real estate portfolios, it is far less popular for new investment with only 20% of capital likely to be deployed into the sector this year globally.
Continued uncertainty concerning the future of office working seems to have dampened investor interest. Of the mainstream sectors, retail is the least popular for new investment, accounting for only 8% of planned deployments overall in 2022. However, retail is more popular among Asia Pacific based investors for whom it is expected to attract 18% of new investment capital.
Across the globe, institutional investors plan to invest at least €68.2 bn in global real estate this year, according to the survey. The majority of this new capital comes from European investors (52%), whilst their counterparts from North America and Asia Pacific account for 26% and 21% respectively. Funds of funds expect to commit a further €8.5 bn, taking the total to at least €76.7 bn. Of this total, €31.5 bn is expected to be invested in European real estate over the next two years.
Shift in risk appetite
While historically investors have allocated most of their capital to core strategies – currently accounting for 83% of institutional portfolios – respondents demonstrated a notable uptick in risk appetite for new investments in 2022. This is particularly pronounced amongst investors targeting Europe, with over half (57%) of respondents indicating a shift in preference toward value added strategies – the highest it has been since 2008.
Conversely, only 30% preferred core strategies, down from 50% last year. Opportunistic strategies are preferred by 13% of respondents targeting European real estate.
