Discussing the findings from an EMEA perspective, Tony Horrell, CEO, UK and Ireland, Colliers International said:  ““Prime assets in the UK and EMEA are generally fully priced and the market for these assets is so competitive that investors in Europe are seeing opportunities in secondary stock in need of capital expenditure to bring them up to an institutional investment grade standard.”

The prospects are bright for EMEA in 2014.  Almost 41 per cent of all respondents told us that they thought property investment conditions in Western Europe will improve in the next 12 months, while only 14 per cent thought it would get worse.  By contrast, there is more caution towards CEE-Russia-Turkey and MENA (18 per cent and 15 per cent respectively expect improvements).  

“This pattern is similar when it comes to expectations about investment volumes, with 63 per cent of respondents anticipating an increase in turnover in Western Europe (excluding UK) in 2013 vs. 2012 and again in 2014 vs. 2013. For CEE, Russia- Turkey and MENA, expectations were more subdued at 44 per cent and 26 per cent respectively, but still encouraging,” said Horrell.

The survey shows that 61 per cent of EMEA investors plan to expand their portfolios and increase their exposure to property.  Approximately 87 per cent of EMEA respondents agreed that, ‘good investment opportunities exist in the global market, but are increasingly
difficult to find.’

Property fundamentals remain the most important investment criterion to EMEA respondents (4.0 on a scale of 0 to 5), followed by economic growth (3.9). Sovereign risk (3.8) scored second-highest globally behind Asia (4.0). The effect of the ongoing debt crisis on risk premium remains high between core and peripheral European markets despite recent improvements in economic and political sentiment.

Walter Boettcher, Colliers Chief Economist and Report Author added:  “Economic fortunes are varied and restraining expansionary business investment EMEA wide; occupier market performance is therefore still a bit mixed.  Prime markets are showing patchy growth in the absence of quality supply, but  secondary markets are struggling with average rents generally flat.

“The German ‘Big-Six’ cities and especially the German ‘Alternative-Twenty’ are offering interesting opportunities.  Poland also has a ’Big Six’ outside of Warsaw (Krakow, Lodz, Wroclaw, Poznan, Gdansk, Katowice) that is in need of new product to accommodate economic growth and development.”

EMEA highlights from Colliers’ newest sentiment report include:
•    Greater Competition in Stable Markets: Many investors cited difficulties in finding good investment opportunities, despite having plenty of capital. As a result, competition is growing in stable markets as investors strive to maintain secure returns.  A large amount of capital is flowing from high-risk nations into more liquid safe-haven markets, especially gateway cities such as London, Tokyo, Sydney, and New York which remain popular destinations for both cross-border and local capital.  

•    Keeping Capital Domestic: Despite increased risk appetites, most survey respondents prefer to invest in markets close to home, with only 10 per cent looking outside of their domestic region for investment opportunities. Respondents from the three EMEA territories examined (Western Europe, CEE and MENA) source the majority of capital in their home regions. If they look outside, Western Europeans  look to the UK and US, CEE Russia-Turkey look to Western Europe and the US, and MENA looks to Asia. For all investors, Germany is the preferred European target market, followed by France. Investors looking at these countries are prevalently based in Western Europe and the UK, underscoring the domestic bias of capital flows.

•    Risk Appetite: The survey shows that EMEA investors are more risk-averse than their peers in other regions. Only 33 per cent of respondents plan to take on more risk in the next 12 months, the lowest percentage in the global sample. This may reflect a view among EMEA investors that they already hold a substantial degree of risk, butthis finding also contrasts with the recent surge in investment activity in Europe’s periphery.

•     Cost of Debt on the Rise: The majority of EMEA respondents (59 per cent) plan to use debt in the future to leverage purchases. This is a decline from the 2012 response (76 per cent). Most respondents (61 per cent) saw little change in underwriting standards over the last six months, but 33 per cent report that debt costs are up and 46 per cent anticipate further increases.

•    Expansion on the Horizon: 61 per cent of EMEA investors plan to expand their portfolios, up marginally on 2012 (59 per cent). Globally, the EMEA expansion ambitions are near the bottom of the table, just above Latin America (56 per cent)

•    Offices Top Asset Class: The report reveals that CBD offices remain EMEA respondents’ preferred asset class (60 per cent), followed by residential (37 per cent—MENA’s top pick). The residential sector was also singled out by several Western European investors, prompted no doubt by a sharp positive re-pricing in some countries.

•    Shifting Focus on Fundamentals: Increasingly, investors are shifting decision-making criteria to focus on property fundamentals and yield.
 “Globally, investors are looking to grow, with 70 percent planning property portfolio expansions over the next six months,” Horrell added. “Overall, investors are optimistic about entering the market at such a dynamic time.”

“Higher confidence will lead to greater investment in the coming year, even as buyers face the challenge of finding attractive opportunities, investment criteria will have to be more flexible.” Horrell concludes.

The Colliers report comes at a time when investors are paying close attention to others’ strategies as the competition for quality investment opportunities increases.  Respondents from across the investor spectrum from sovereign wealth to private equity were asked for their outlook at the global and regional level for 2014 and beyond. With more than 500 responses from the U.S., Canada, Latin America, Asia Pacific, Europe and the Middle East, the results highlight a number of key indicators suggesting strong investor appetite for real estate assets, heightened confidence among global investors and increased risk tolerance, even in areas where the economy is less certain.