European pension and insurance funds will likely increase their allocation to real estate funds by 1%, or €60 bn in fresh equity this year, Colliers International has claimed in a new report.
European pension and insurance funds will likely increase their allocation to real estate funds by 1%, or €60 bn in fresh equity this year, Colliers International has claimed in a new report.
Colliers also forecasts a 3% shift, or €180 bn, over the next three years.
The increases will come at the expense of fixed-income and equities as institutions push towards higher-yielding assets
These are some of the key findings in Colliers International's research document, A New Era for Institutional Investment in Europe: From Risk Averse to Risk Aware.
The report suggests that the figure would be higher were it not for supply constraints and competition from sovereign wealth funds.
Colliers also said that the period of 'safe haven investment' may be ending as institutions seek greater returns to match investor expectations and growing pension fund liabilities.
The recent peak in equities and bonds suggests that institutional investors will look again at real estate. And, as low interest rates may give rise to considerable further yield compression and as debt availability improves, leveraging will also support increases in investment.
An increase in co-ownership structures is forecast, particularly semi-open ended real estate funds to allow for longer-term investment.
Richard Divall, head of cross-border investment EMEA at Colliers International, said: 'It is noticeable that institutions in the UK are already moving. Given Europe’s economic landscape remains highly idiosyncratic and its reliance on consumption-led growth, interest rates are likely to remain low for some time, and this should lead to an increase in leveraged investment activity targeting European real estate.'
The full report as well as a summary are available in the links below.
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