Institutions tipped to move €368b into real estate over 3-5 years

Institutions could move $400 bn (€368 bn) into global real estate over the next three to five years to diversify holdings and stabilise returns, according to Colliers' Global Investor Outlook report for 2016.

Colliers estimates that up to $400 bn of institutional funding could begin chasing global real estate to diversify and stop an ongoing bleed of cash driven by the underperformance of traditional fixed-income investments.

More than half (52%) of the over 600 investors surveyed plan to increase real estate allocations within multi-asset portfolios and as such, European volumes are expected to increase further in 2016 driven by a variety of prime markets and attractive lending conditions.

However, Colliers noted, fewer investors expect to be net buyers. US investors remain committed to Europe, with a third of them planning to invest in EMEA during the next 12 months.

'Our global analysis in this report gives a unique macro-view, providing a comprehensive look at the health of the economy as well as in-depth views of market sentiment that serve as a useful bellwether for local markets Worldwide,' said John Friedrichsen, chief financial officer at Colliers International.

Target markets
Primary target markets will continue to draw the most interest, with moderating risk appetite, stable economic conditions, and low interest rates driving increased investment in secondary markets. Transactional activity in the first nine months of 2015 confirms this assessment, with $625 bn of direct property investment worldwide, representing an 11% increase over the same period of 2014, according to Real Capital Analytics.

The Global Investor Outlook report for 2016 found that despite a reduced appetite for risk, debt would play a greater role in the market next year as investors seek to boost cash-on-cash returns.

This is being particularly driven by opportunity-led American private equity which is shifting from UK to continental Europe because it can achieve higher returns.

Investors from outside EMEA will typically have more of a narrow focus around London, Paris and the key German cities, with Madrid also on the radar. Asian capital will continue to focus on London and German cities in 2016, underscoring investors’ reduced appetite for risk.