21st March 2018

EMEA Investor Intentions Survey 2018

Industrial, and specifically logistics, is the most sought-after real estate sector for European investors, overtaking office for the first time, according to CBRE’s annual EMEA Investor Intentions Survey. With the growth of e-commerce continuing to benefit the sector, a third (33%) of respondents in Europe expressed a preference for industrial property, mirroring the trend globally, and reaffirming its status as an institutional asset class.

Across EMEA, office was ranked second, favoured by 26% of respondents, with investors seeking markets with strong economic fundamentals to underpin rental growth and high-levels of liquidity. Residential has seen the steepest rise in popularity, compared to 2017, and was the preferred asset class for 21% of EMEA respondents.

A defining feature of the market last year was the rise in sales of large portfolios, specifically ‘platform’ deals. Notable transactions included Blackstone’s €12.2 billion sale of the Logicor Portfolio to the China Investment Corporation and Brookfield’s $2.8 billion sale of IDI Gazeley to Global Logistics Properties. Not only did the purchasers, typically large Asian investors, access the market at scale, but by buying an operating platform they also acquired the infrastructure and management expertise to manage the assets and continue to develop the portfolio.

Jack Cox, Head of EMEA Industrial and Logistics Capital Markets
2017 was the year the industrial and logistics sector was unquestionably re-rated, evidenced by the number and scale of platform deals we saw in the sector. Logistics yields remain at a premium over other real estate sectors, and the sustainability of returns in the sector is underpinned by a robust occupational market, which is attracting investors from around the globe.
Jack Cox, Head of EMEA Industrial and Logistics Capital Markets

Driven by aggressive asset pricing and limited availability of core stock, investors globally have become increasingly resourceful in finding innovative ways to deploy capital. In EMEA, 72% of respondents indicated that they were already invested in alternatives and 70% said they were actively pursuing opportunities in the sector.

Alternatives have seen a 45% increase in investment volumes in the last ten years, resulting in €23.6 billion of transactions in 2017. Investors are most frequently targeting student housing (53%), retirement living (38%) and real estate debt (37%); an area where they are looking to increase exposure in 2018. This broadly mirrors the trends we are seeing globally.

In addition to sector preferences, the survey also analysed geographic considerations. Paris, Madrid, Amsterdam, Frankfurt and London were the five most sought-after destinations in Europe for European investors. Paris jumped from fifth to first place, compared to 2017, boosted by expectations that the political and economic momentum from H2 2017 will have a positive impact on the real estate market. London remains the highest priority target for investors outside of Europe and will undoubtedly continue to see the highest volume of investment activity of any European city.

Jonathan Hull, Managing Director, EMEA Investment Properties, CBRE
While sentiment does not always translate directly into investment volumes, investor preferences do indicate which markets may see heightened activity over the next 12 months. We have seen a shift in sentiment in France for many months now, following the election of President Macron and the subsequent economic momentum this has created. Madrid has seen strong investor interest thanks to improving economic fundamentals. Limited development activity and declining vacancy rates in Amsterdam have boosted its appeal over time. The current strength of the German economy and the lack of supply continue to drive investor demand in all of its key markets.
Jonathan Hull, Managing Director, EMEA Investment Properties, CBRE

Despite 2017 being a record year for real estate investment in Europe, with volumes totaling €291 billion, European investors expect to deploy more capital in 2018 than they did in 2017. A third of EMEA investors (33%) expect to spend more this year than last, compared to 26% last year. At a global level, 45% of investors anticipate committing more capital to real estate. However, as in 2017, availability of product remains a primary concern for investors in 2018, proving to be the biggest obstacle for 34% of European respondents, a challenge that investors are facing around the globe.

Asset pricing has become a key concern for investors, and is even more pronounced than in last year’s survey. Nearly half (44%) of EMEA respondents highlighted it as an obstacle to investment, compared to 38% in 2017. At the same time, the sector continues to appear reasonably priced relative to other asset classes, particularly considering the high-income return and defensive characteristics real estate offers. Competitive pricing of assets is also encouraging some investors looking to sell real estate, with 40% of investors expecting to sell more in 2018 than in 2017. A higher propensity to sell as well as to buy bodes well for market liquidity in 2018.

Jos Tromp, Head of EMEA research at CBRE
With limited stock availability, we are expecting to see a continuation of investment activity at a corporate entity level as investors seek to find ways to increase their exposure to real estate. Prime yields are at an all-time low, so investors are looking at alternative asset classes through which to spread their risk, protect themselves against a possible downturn and take advantage of the structural changes that are underpinning demand in these sectors.
Jos Tromp, Head of EMEA research at CBRE

Members of the American Chamber of Commerce in the Czech Republic