€8.5b in returns expected from European non-listed real estate funds by 2019

A total of 47 European non-listed real estate funds are scheduled to terminate between now and 2019, returning a potential €8.5 billion ($10.14 billion) to the market, according to new research from INREV, the European Association for investors in Non-Listed Real Estate Vehicles.

Twenty-seven funds are due to terminate in 2017 alone, representing €5.6 billion ($6.7 billion) of total net asset value (NAV). In 2018, 13 funds totalling €1.6 billion ($1.9 billion) of NAV are scheduled to terminate and a further seven funds, amounting to €1.3 billion ($1.5 billion), will terminate in 2019.

Fund terminations scheduled for 2017 are almost evenly split between multi-country and single-country vehicles (59.3 percent versus 40.7 percent). Of these, almost half (45.5 percent) have a U.K.-focused strategy and account for 80.6 percent of the overall NAV.

Retail funds make up the largest share of sector-specific vehicles terminating over the coming two years, a potential reflection of investor sentiment as shifting consumer shopping habits continue to drive structural changes in the sector. Retail funds make up 40 percent of the single-sector funds terminating in 2017 and this trend is likely to continue into 2018 where retail vehicles will make up 60 percent of single-sector fund terminations.

“2017 is the year of extensions, which comes as no surprise as real estate funds in extension have enjoyed far healthier returns than those that have been liquidating over the past five years,” said Henri Vuong, INREV’s director of research and market information. “This trend underlines investors’ continued appetite for the sector and confidence in the diversification benefits of real estate.”

However, in a recent study done by Union Investment, only one in four real estate investors in Europe believes that the current market cycle will peak soon and that the initial rate of return on real estate will start to rise again. The overwhelming majority of respondents (75 percent) do not expect a turnaround until 2019. Of that figure, 43 percent expect it to come even later.

INREV was launched in May 2003 as a forum for investors and other participants in the growing non-listed real estate vehicles sector. The association represents and reflects an industry with a total value of €2.1 trillion ($2.5 trillion) and INREV members deliver €300 billion ($358 billion) of stimulus to the real economy of Europe.