EUROPE – Shorter lease agreements are top of the wish list for German and UK investors wishing to take on more real estate investment risk.
French investors, however, equally value shorter leases and project developments when it comes to finding alternatives to core, Union Investment has found in a survey of institutions from these three countries.
Union said the current low-interest rate environment was “more and more strongly influencing investment decisions by European institutions”.
As demand for core assets increases, they grow more expensive and difficult to find, which forces investors to look for alternatives.
According to the survey, almost two-thirds of UK investors are willing to take higher risks to achieve “adequate returns”.
In France, there is a similar trend, as return has become a decisive factor for 44% of investors compared with 20% half a year ago.
German investors still perceive safety and return as equally important, according to Union.
Going into project development is less of an option for German investors, however.
They currently prefer to put less weight on sustainability criteria in investments, or even accept a lower quality in buildings, Union said.
To minimise risk concentration, most investors will focus in future on multi-tenant buildings rather than invest in assets with just one tenant.
Also, almost half of all surveyed investors want to increase their investments in B-locations while concentrating on core Europe, which is still considered a safe haven.
Only 14% aim to increase their investments outside Europe.
Union expects demand for core assets in Europe to grow even more as sovereign wealth funds from Asia and the Middle East increase exposure to European real estate.