Only 43% of European investors report any increase in risk appetite since early 2011, compared to 46% globally, and 64% in Canada where investors show the biggest uplift in risk appetite.
Colliers International
released its 2011 Global Investor Sentiment Survey today, which takes the pulse
of property investors worldwide, measuring their appetite for risk, optimism,
key concerns and sense of market cycles.
In Europe,
64% of investors surveyed reported they were more than likely to look to
increase their real estate holdings. However, stock remained a concern with 49%
reporting the supply of “for sale” property remained a key barrier to expansion
and over 54% stating they were focused on core property with target IRRs of
five to 10 per cent. With 57% of investors reporting their risk appetite had
not increased since the start of the year, it is not surprising those looking
to expand are focused on safe bets.
Globally, around 71% of
respondents stated they were more than likely to look to expand, and as with
Europe, the biggest concern for global investors was whether there was enough
supply of “for sale” property to enable them to meet their expansion
plans.
“Given the continued
aversion to risk and the recent investment trends in Europe, we continue to see
investors demonstrating a strong preference for acquiring offices in London and
Paris; closely followed by German retail property in general and offices in
Hamburg,” said Ewen Hill, Director, International Investment, Colliers
International UK.
The cost of finance for
real estate investment has shown no signs of improvement, with 41% of European
investors actually reporting a rise in financing costs and 44% stating they had
seen no change. In contrast, 68% of
investors surveyed in Canada
reported that the cost of debt had fallen.
In terms of the
occupational cycle, the largest portion of European respondents (40%) reported
demand is rising and headline rents are beginning to increase. With the current
favoritism towards prime property amongst investors, it is likely there is some
bias in the results towards this end of the market and consequently don’t fully
reflect the rather murkier outlook for much of the secondary market.
Looking ahead, almost
two-thirds of European respondents reported they expected the cycle to have
improved in 12 months’ time. That being said, investors are not overly bullish
on rental growth, with two-thirds taking the view that rents will be unable to
outpace inflation over the next five years.
This is in contrast to the outlook in Australia
and New Zealand,
where investors believe that rents will outpace inflation over the same time
period.
Looking at the relative
attractiveness of real estate as an investment in comparison to ten years ago,
the majority of European investors (62%) reported they felt that its
attractiveness had not increased. Changes to working patterns in the office
market and the growth of online retailing have had an adverse effect on poor
quality real estate in secondary markets, rendering it obsolete.
In real estate’s favor, a
number of respondents took the view that much improved transparency in the
reporting of real estate returns had made it more attractive, particularly to
institutions, with returns able to be measured against other asset classes in a
more reliable fashion.
The Global Investor
Sentiment Survey was conducted by Colliers International Research in
collaboration with senior professionals from Colliers International’s Global
Investment Services division. The survey was conducted the first two weeks of
August 2011. A comprehensive, 40-plus page report is available at www.colliers.com/globalinvestment.
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