The Pension Real Estate Association (PREA) provided more evidence of the growing interest in European real estate among US institutional investors when it held its 23rd Annual Investor Real Estate Conference in Chicago at the end of October.

The association, which represents the institutional real estate investment industry in the US, held a panel session dedicated to investment opportunities on the other side of the Atlantic.

Kenneth Kaplan, senior managing director and head of real estate Europe for The Blackstone Group, said: “In Europe, we have seen that there was a limited amount of capital invested in the [region] from 2008 through 2010. The activity there has really picked up, starting in 2012 and is now continuing this year. We see the marketplace being in the early innings of a full recovery. Most of the opportunities are a pure distress investment play.”

Jeffrey Dishner, senior managing director of acquisitions for Starwood Capital Group Global, said he had seen a big shift in the allocation of capital that Starwood had deployed in the US versus Europe. “From 2009 to the beginning of 2012 we had invested 96% of our equity in the United States,” he said. “Over the past two years this has moved to an even 50/50 split between the two regions of the world.”

Aref Lahham, managing director and founding partner for Orion Capital Managers, said he had noticed a lot more capital coming into Europe. “We have seen a lot more sources of capital from the United States now looking for assets in Europe,” he said. “This is a shift we have seen over the past couple of years and has led to more competition for our deals.”

Spain was identified as a market attracting a lot of attention, partly because of the government-controlled SAREB, which is expected to be a willing seller of distressed assets.

The panel, which included Ronald Kravit, senior managing director for Cerberus Capital Management, agreed that the size of the opportunity in Spain could end up being very significant with the aggregate value of assets available in the range of $100bn (€72.6bn).

There was some questions about whether this investment opportunity would actually transpire, and comparisons were made to the anticipated distressed-debt opportunity in the US two to three years ago when the volume of assets offloaded by banks and other lenders failed to reach expected levels.

The panelists noted that it would not be easy for US capital to have an impact on the real estate markets in Europe.

“I think that you need to have local market expertise,” said Lahham. “It’s more than just showing up with capital. You need to team up with local players who have the ability to source deals for you and take advantage of the relationships they have formed.”