EUROPE – European investors remain unwilling to increase the riskiness of their real estate investments despite core properties becoming rarer, Union Investment has said.
The German asset manager commissioned market research group Ipsos to survey 150 people responsible for investments at real estate companies in Germany, France and the UK and found that companies remained weary to compromise on core investments even in the face of an increasing shortage in supply.
Almost 60% of surveyed investors opted against increasing the risk in their portfolios and only a third of respondents said they would consider higher risk.
However, Union noted that risk appetite varied according to the region. Fifty-nine per cent of UK investors were willing to take more risk, but only 28% of French companies and 12% of the German survey participants agreed with the sentiment.
Overall, investors' favourite region remained Western Europe – despite prices continuing to increase.
The only compromise investors were currently willing to make was to invest in buildings with more than one tenant, a strategic shift reported by 57% of the surveyed companies. A further 38% said they were including more secondary locations for diversification, 36% would invest in smaller-size objects and 33% in logistics.
Only a minority of investors were thinking about a higher exposure to properties outside of Europe (22%), or including hotels for diversification purposes (17%).
In the near future, investors said they would consider further compromises, and 81% said they would be willing to accept shorter rental contracts. Two-thirds said they were planning to get involved more strongly in project development and 52% would consider lowering the share of rental agreements signed before completion.
Curtailments regarding location or quality of the building would only be accepted by a small number of investors.
Asked where they expected the most significant price corrections of the next 18 to 24 months to occur, 57% of the respondents mentioned Spain, 47% Italy, 37% France and 35% Portugal.