GERMANY - Solvency II is not perceived as an obstacle to real estate investments, despitebeing seen as a challenge for Germany's Pensionskassen and insurers.

More than half of the 40 surveyed German insurers, Pensionskassen and Versorgungswerke said that Solvency II was no reason to refrain from investing in real estate, Ernst & Young found in its 2011 real estate trend barometer.

Dietmar Fischer, partner at Ernst & Young Real Estate explained: "By now, some companies have started to develop risk models which are taking capital requirements under Solvency II into account."

For the current year the surveyed companies, which currently manage an average of €2.2bn in real estate assets, are planning further property investments of €365m per institution.

"This is almost 31% more than in 2010," Fischer said.

However, companies are also planning to sell more than twice as much this year with property worth around €118m up for sale per company.

"The results suggest that apart from increasing the real estate quota, a qualitative re-structuring of the portfolio is gaining in importance," noted Fischer.

Main objects of interest remain office, retail and residential developments, but Ernst & Young also found a number of offices were being sold.

In general, risk appetite has increased again with new interest seen in infrastructure and logistics as well as regions outside Germany and the rest of Europe - however, still only opportunistically or as a small part of the portfolio.

Further, while direct investments and real estate Spezialfonds are still the most widely used investment vehicles but project developments are becoming more attractive.

Yield expectations have increased from 4.8% last year to 5.1%.