Research - MAY 23, 2017

German real estate expensive for institutional investors

by Released

German real estate is expensive for institutional investors, according to a fourth annual survey by Universal-Investment. Around half of institutional investors believe property prices in Germany are high but still acceptable, while 37 percent of investors find properties overpriced.

The situation in other European markets is far less tense, with only one-quarter of respondents viewing prices as unacceptable. Outside Europe, only 12.5 percent find real estate prices inappropriately high.

Germany is also becoming less popular on the investor preference scale. Investors plan to make only 45 percent of new investments in the German market (previous year: 67.5 percent). Preferences for the rest of Europe remain good, with slight gains being recorded to 25 percent (previous year: 22.5 percent). North America, by contrast, achieved significant gains in this area, with respondents declaring their intention to make 19 percent of new investments in this region (previous year: 5.7 percent). Asia also gained 1.8 percent to 8 percent.

According to the survey, investors do not plan to significantly expand new investments in office real estate. The share of respondents keen to make new investments in this segment remains more or less unchanged, at 37 percent. In the area of new investment projects, an increase was recorded among retail assets from some 21 percent in the previous year to approximately 25 percent. Interest in the logistics segment has risen. Readiness for new investments has climbed here from some 8 percent in the previous year to around 12 percent. The residential segment dropped to around 19 percent from some 34 percent in the previous year.

The survey shows that institutional investors are relying more on indirect real estate investments for their new investments, with some 87 percent of new investments likely to be made by way of fund investments in the next 12 months. Direct real estate investments have fallen further to 13 percent, evidencing the ongoing trend toward indirect investment vehicles. In the previous year’s survey, the rate of those in favor of the indirect alternative was already at 55 percent.

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