The coronavirus crisis has triggered a significant shift in the investment strategies of institutional real estate investors, with the majority adopting a 'lower risk, lower return' approach, a survey by German fund manager Union Investment Real Estate reveals.
The survey of 150 professional investors in Germany, France and the UK found that 58% are pursuing a lower risk strategy, compared with just 35% prior to the outbreak of the pandemic. The shift is especially pronounced in the UK, where security is the main investment motive for 79% of those surveyed.
However, only 5% of the European investors polled intend to avoid investment in real estate altogether in the current climate.
The coronavirus pandemic has also led to a marked shift towards climate-friendly investment, with 54% of respondents planning to invest more in this segment. Close to half (49%) of those surveyed are seeking to acquire more core properties as a result of the virus, while 42% indicate that they will be investing more in their own country. This change in emphasis is particularly strong in France, where 71% of domestic investors are planning to undertake climate-friendly investment, while 65% intend to buy core properties and 59% are choosing to invest increasingly in their home country.
Healthcare and logistics are the most favoured asset classes among European investors in the current market phase, with 65% of respondents predicting that more capital will be channelled into these categories.
'Both these property types are less prone to crises and help to stabilise cash flow in a portfolio,' said Olaf Janßen, head of real estate research at Union Investment. At the same, the residential asset class also remains attractive: 55% of survey participants anticipate rising inflows into this sector.
The majority of European real estate investors (57%) expect the German property market to rebound fastest from the coronavirus pandemic. The real estate markets in Paris (30% of respondents), London (29%) and Stockholm (23%) are also considered to have good chances of recovery. The study indicates that the markets in Milan (55%), Madrid (47%) and Barcelona (33%) are likely to struggle with the consequences of the pandemic for longer.
'Germany benefits from its economic strength and the government’s successful crisis management to date. Berlin and Frankfurt, like other German locations, have a modest pipeline of new office space, giving them a good chance of getting back to normal faster,' added Janßen.
