By mid-summer 2013, a number of early signals, including a return to positive territory for GDP growth, suggested that the European economy had finally reached a turning point in its long path to recovery. Fixed-income investors are adjusting risk and return criteria, resulting in rising bond rates in safe-haven markets. Investors are increasing their risk appetite in search of yield. This raises the question of whether real estate investors should follow suit. Since the onset of the downturn, real estate investing has been narrowly focused on prime, income-secure assets in a limited number of perceived safe-haven markets, including France, Germany, the United Kingdom and the Nordic countries.

Together, these markets account for a little over 85 percent of capital invested in 2012, yet represent 57 percent of European GDP. Within these markets, risk aversion has resulted in strong pricing of prime, income-secure assets despite modest rental growth expectations and rising cap