Nordics on the rise as UK & France fall out of favour

The Nordics and Germany top the list of preferred locations for non-listed real estate investors keen to reduce their risk in the face of turbulent economic conditions, according to INREV's Investment Intentions Survey 2012.

Around 64% of respondents to the survey identified German retail as their preferred country/sector combination for investment compared with 34% last year, putting it top of the list for the second year running. Next in line was Nordic retail with 50% of investors declaring a preference for this combination (up from 25% a year ago).

Nordic offices came third on the list of investor preferences. By contrast, Italy, Spain and Portugal have fallen out of favour: more than half of investors are expected to decrease their allocations to Portugal, and 42% will do the same in Spain and Italy.

Investors have also lost their appetite for the UK, which has fallen out of the top five preferred locations. In 2011, UK offices, retail and diversified funds all figured in the list of top 10 preferences. This year, however, only UK offices made the list, and this by a relatively slim margin.

France has taken a beating too. The French offices market, which last year came second in the list of preferred country/sector combinations, dropped to sixth with just 12% of investors selecting it as their preferred option. However, investors expect to increase their allocations to France over the next two years.

In terms of style, the majority of investors (69%) opted for core funds, strongly driven by Dutch Investors. While safe havens remain in vogue, some investors appear to be taking a more bullish approach demonstrating a keenness to capitalise on current market conditions through the relatively more risky opportunity and value-added funds.

Interest in opportunity funds has increased to 10%, up from 3% in 2010. Similarly, nearly half of investors anticipated increasing their allocation to value-added funds over the next two years, despite only 22% of them highlighting these funds as their preferred style.