Europe is likely to attract a sizeable chunk of almost €100bn of new money ploughed into real estate in 2020 – a year in which investors are set to move up the risk curve in their ongoing hunt for returns.

Investors are poised to put roughly €98bn of new capital into property globally this year, according to the latest Investment Intentions Survey from trade bodies the European Association for Investors in Non-Listed Real Estate Vehicles, the Asian Association for Investors in Non-Listed Real Estate Vehicles, and the Pension Real Estate Association.

The survey grilled 125 investors and 15 funds of funds. Of the new real estate investment expected this year, Europe is predicted to attract almost €40bn, the survey suggests, making it the largest beneficiary of new capital. Some €28.3bn is earmarked for Asia Pacific and €19.4bn for North America.

European investors will be responsible for 61% of the new investment in property in 2020, with about 20% each coming from Asia and North America.

Survey respondents showed a growing appetite for risk, with 20% of those investing in Europe highlighting ‘opportunity’ as their preferred investment style over ‘core’ or ‘value-added’ – the highest such percentage in the survey since 2009.

Lonneke Löwik, INREV’s chief executive, said: “The continued lower interest rate environment looks like being an important driver for 2020, as investors seek returns from real assets including real estate; and the shortage of core assets is driving investors further up the risk curve.”

UK retail far out of favour

Investors active in Europe appear to be focused first on Germany (preferred by two-thirds of respondents), then the UK (63%) and France (57%).

By sector, offices are investors’ top pick, with industrial and logistics, and residential in joint second place.

As problems for retail businesses mount, investors are still discouraged from picking up retail property assets.
European, North American and Asian investors all ranked retail as their fourth preferred sector, with only 10% of funds of funds showing a preference for retail.

This edition of the survey was the first since 2012 in which UK retail fell out of the top 10 preferred country/sector combinations for investors. Their top picks this year were French, German and UK offices, and German industrial and logistics.