The fear of Brexit is spooking the financial markets, but the unprecedented weight of international capital seeking to invest in European property is such that prospects are positive for real estate, experts agreed at a packed PropertyEU European Outlook Investment Briefing, which was held on Tuesday at the offices of Colliers International in London.
Next week's referendum in the UK has undoubtedly led to a slowdown in transactions in the first half of the year, as well as causing much uncertainty and debate. However, whatever the outcome of the vote may be, the demand for European property will remain high.
'What has not changed and will not change is the weight of capital, and the huge appetite international investors have for higher yielding assets, which is enough to keep Europe going for at least a decade,' Dr Walter Boettcher, research director and economist, UK & EMEA at Colliers International told the record 100-plus audience that attended the morning briefing. 'International investors, especially sovereign wealth funds, are already active in the market regardless of the referendum. They have not changed their outlook much.'
What is driving the market, said Jos Short, executive chairman, Internos Global Investors, is 'the huge capital push, due to the fact that you get negative returns on cash, expensive returns on bonds and volatile returns on equity, so putting your money in real estate and infrastructure makes sense.'
Sovereign wealth funds, high net worth individuals, US opportunistic investors, Asian pension funds and the third wave of Chinese investments funds are all targeting Europe, he said. The target allocation to commercial property has increased from 8.9% in 2013 to 9.9% in 2016 and will rise further to 10.2% - some 3 trillion dollars - regardless of the result of the UK referendum.
'Hong Kong family office money is more worried about the slowdown of China or forex risks than about Brexit,’ said Richard Divall, head of cross-border capital markets, EMEA at Colliers International. 'South Korean capital funds are investing in the major European cities. As for US capital, we just sold an asset in London to the State of Oregon at above the asking price.'
Competition is intensifying, particularly in markets regarded as stable, like Germany but also the Netherlands and the Nordics. 'Capital inflows have already pushed prices and demand to the limit, which is creating difficulties. In Germany recently there were twenty bids for the same asset, fifteen of which at above asking price,' said Philip La Pierre, head of investment management Europe at Union Investment Real Estate.
What is positive, he added, is that 'the pressure of capital will keep markets stable in Europe. If you look at the depth of equity that has not been allocated to real estate yet, you know that money will not disappear. The wall of capital out there is pretty strong.'
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Outlook Europe H2 briefing programme
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The London event - which attracted over 100 real estate professionals - was the first of three morning events in PropertyEU's annual Outlook Europe H2 investment briefing programme.
Outlook Europe H2: Germany & European Markets in Hamburg
The discussion on a potential Brexit and other threats and opportunities for the development of the real estate market takes on a more Continental European flavour for the next event, which is hosted by Union Investment Real Estate in Hamburg on 22 June, a day before the British public head to the polls.
Investment specialists including the speakers from Union Investment, Catella, DREF, Corestate and AF Advisory will look at the implications of a majority for 'stay' or 'leave' in the referendum, and consider whether European real estate markets will experience an investment bounce in the aftermath of the vote. The panel will also examine other key investment trends, both in Germany and continental Europe. What are the strategies best suited for investors at this point in the cycle? Which sectors are likely to outperform?
European Real Estate Opportunities - Investment Outlook 2016 in New York
Six days after the referendum, PropertyEU's second European Real Estate Opportunities seminar for North American investors in New York will serve as a early briefing on the impact of the 'Brexit' result, as well as insights and local intelligence on the investment outlook, macroeconomic and politic environment across Europe.
Click here for more information and to sign up to the Outlook events in Hamburg and New York
