[Real Estate Barometer Q2 2018] 'Everything in moderation', say real estate investors as appetite for low and high-risk strategies drops
Research | July 31, 2018
Data from 5,000 international commercial real estate investors shows that over half (52%) now favour moderate risk investment strategies, a 13% year-on-year increase. Meanwhile, investor support for high-risk (Opportunistic and Speculative strategies) and low-risk (Core, Core plus strategies) have dropped 9% and 14% year-on-year respectively.
US real estate investors showed the strongest appetite for moderate risk opportunities with over 62% favouring this strategy, a dramatic 29% increase year-on-year. Investors based in the UK, Germany and France all increased their weightings towards moderate strategies to 53%, 49% and 48% respectively.
The Barometer reveals a significant shift away from capital growth as the leading investment objective towards income (41%) and liquidity (8%), which have risen by 11% and 21% respectively, suggesting that investors are increasingly focused on yield and easier divestment opportunities should the market cycle turn. During the same period, investors' projected allocation to real estate over the next 12 months has remained at 3.8% of total assets under management.
Despite Brexit uncertainty, the UK remains investors' favourite choice of European commercial property markets (29%) ahead of Germany (23%) and America (22%).
Emmanuel Lumineau, CEO at BrickVest, commented:"With prime European commercial real estate yields continuing to tighten, investors are having to decide which strategies are likely to produce the most attractive risk-adjusted returns. Moderate risk assets are continuing to gain favour among investors. Those who have traditionally favoured conservative strategies are willing to accept greater risk as long as it means a more attractive yield and offers a higher degree of liquidity . At the other end of the risk spectrum, support for opportunistic and speculative development has dropped as investors become increasingly sensitive to being exposed to a potential turn in the cycle."