Judging by capital-raising figures, investment in large fund structures is definitely back in vogue. Equity totalling €18.1 billion poured into private European real estate funds in 2013, according to the latest (May 2014) Capital Raising survey from INREV, the European Association for Investors in Non-Listed Real Estate Vehicles; a five-year high and one that eclipsed the average amount raised across 2008–2012 by a staggering 77 percent.
From the Current Issue
In hopes of pumping up the rapidly-deflating euro — and the 19 European Union economies that it calls home — the European Central Bank has decided to start down the financial path already trod by the United States, the United Kingdom and Japan, instituting its own bond-buying programme known as “quantitative easing”, which Mario Draghi, ECB president, hinted at in his famed “big bazooka/whatever it takes” speech in July 2012.
London and Paris stand alone in Europe as the continent’s truly global cities. They are not only leaders in terms of commerce, they are also world-renowned centres for politics, sport, culture, history, tourism, transport and education. All these factors influence the unique real estate needs of the two cities, shaping the urban environment while creating large, liquid markets that are able to provide opportunities for investors throughout the cycle.
Depending on the market and its culture, regulation and economics, rental housing plays a significant role in Europe’s residential property sector, in both regulated/social and unregulated/private spheres.
The financial crisis and resulting wave of homeowner foreclosures in the United States has had long-reaching behavioural effects not easily captured in standard demographic metrics. It is not strange, then, that many people have missed a fundamental change in demand for rental housing there, which has created an opportunity unlike any that we have seen in more than three decades of investing and operating US rental properties.
Europe will present attractive distressed asset opportunities for many years to come.
Most of the money that flows into institutional real estate around the world is targeted at providing individuals with retirement income or long-term security. That could change going forward, for a number of reasons. Real estate’s foundations are in danger of being undermined.
Transaction volume in the UK hotel market last year reached £6.1 billion (€8.0 billion), according to Savills, the highest annual total since 2006. Meanwhile, German hotel investment had a record year in 2014.
Moorfield Group Ltd has held a final close for Moorfield Real Estate Fund III with more than £350 million (€462 million), and Deutsche Alternative Asset Management Ltd has raised a discretionary fund of €500 million.
Unusual times call for adaptive measures. In response to incredibly low interest rates, slow economic growth and continuing economic uncertainty since the global financial crisis, institutional investors have had to rethink how they construct their portfolios — and which bricks will be best to build around.
Institutional investment in property should continue its upward trend in 2015, according to this year’s Investment Intentions Survey from INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, conducted along with industry associations ANREV and PREA.
A recent report from Knight Frank has revealed that office space in Hong Kong is more than twice as expensive as prime commercial property in any other global city.