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 favour, 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.
Editor's note: For Greece
In Greece, tourism product can form opportunities for investment sales, especially under the forthcoming provisions for freehold properties in beachfront hotels and resorts. Increasing yields, combined with evidence of decreasing values, are expected to provide cash rich/equity investors with opportunities where they are will to take risks.
As for offices and shopping malls, the market is experiencing low activity, facing low demand due to the economic downturn from the cost cutting and tax increase. However it is estimated that balances will be restored following the reconstruction of both, economy and market.
The lease renegotiations values show an elasticity of the domestic real estate market while gradually adapting to the new economic standards. The rising yields and the decrease in prices are expected to indicate opportunities, especially for investors with high availability and equity.