The pull of European real estate has been substantial in the past two years across the equity and debt spectrum, driven by an enduring relative value compared to fixed income and other growth assets as well as by a low interest rate environment that is not expected to change in the near term.

Furthermore, deepening liquidity in lending markets has seen real estate debt emerge as a standalone investment asset class, as pension funds, insurance companies and sovereign wealth funds all compete in the “global hunt for yield”.

For most sophisticated real estate investors, the choice is not between equity and debt but increasingly in striking a balance between both.

“In institutional portfolios, real estate debt is generally used as a liability-matching asset, with a high correlation to interest rates,” explains Rob Martin, director of research at LGIM Real Assets. “Equity investments are ty