Real estate debt is set to remain the preferred alternative investment choice this year as investors continue to move up the risk curve and diversify their strategies.
Real estate debt is set to remain the preferred alternative investment choice this year as investors continue to move up the risk curve and diversify their strategies.
According to CBRE’s 2015 European real estate investor intentions survey, the search for yield is leading to heightened interest in alternative real estate, with debt topping the list.
Within the alternative segment, real estate debt has seen the most dramatic increase in activity over the last two years, with €49 bn of investments taking place in 2014 compared with under €10 bn in 2012.
The survey found that 32% of respondents will actively be pursuing opportunities in real estate debt in 2015, followed closely by student accommodation (27%), leisure/entertainment and healthcare (both 17%) and retirement living (15%).
At a country level, the UK remains the most attractive market in Europe, selected by 31% of all respondents, with Germany and Spain sharing second place on 15%. The largest change this year was the 10% of investors who selected France as EMEA’s most attractive market, up from just 5% last year. Italy also saw an increase attracting 6% of responses up from 4% in 2014.
Jonathan Hull, managing director of EMEA capital markets at CBRE, commented: ‘Investors are constantly having to evolve their investment strategies, in their pursuit of yield and returns, as demand for European commercial real estate shows no sign of abating. This diversification is leading investors into new markets and sector. However, there is still significant demand for core locations and assets, particularly from the growing influx of capital from outside the region.’
‘Interestingly,’ he added, ‘a large proportion of respondents stated their intention to increase their overall trading activity across a broader spectrum of risk this year. This movement up the risk curve should benefit a far wider range of markets and sectors across the region’.
The Russian market seems to be close to bottoming out after price falls for some assets exceeded 40% in 2014. There is a potential for one more downward wave in prices, which may reduce current levels by an additional 15-25%, CBRE said.