decline in sentiment from first quarter 2017 to first quarter 2018 toward high-risk property investment strategies such as opportunistic and speculative development. Appetite for low and moderate risk strategies including core and core-plus has risen by 16 percent and 5 percent, respectively. During the same period, investors’ projected allocation to real estate over the next 12 months has remained at 3.3 percent of total assets under management.
While capital growth and income remain the two leading investment objectives, support for liquidity has surged by 40 percent over the past year, suggesting that investors are increasingly focused on easier divestment should the market cycle begin to turn.
The Barometer shows that investors’ overall risk appetite has fallen by an average of 10 percent with favorability toward Secondary assets dropping by 9 percent and Prime assets rising by 6 percent.
The United Kingdom retains its top spot as Europe’s most popular commercial property market (31 percent) ahead of Germany (23 percent) and France (18 percent) despite slow progress on Brexit and lack of clear direction on the terms of the eventual split.
However, the findings suggest that U.K. investors have on average become more risk averse than in other markets; their appetite toward high-risk investment strategies has dropped by 33 percent (24 percent average); the importance of liquidity has risen by 55 percent (40 percent) and support for secondary assets has fallen by 12 percent (9 percent).
“Commercial real estate markets are attracting record levels of capital, but the Barometer strongly indicates that investors are becoming more attracted to lower risk strategies,” said Emmanuel Lumineau, CEO at BrickVest. “At this late stage in the cycle, it’s likely that many investors will be looking to trim their exposure to higher risk assets and liquidity will become increasingly attractive, so they can be better protected should the market start to turn. Whether more investors will join the flight to safety will be a key trend to watch over 2018.”