Real Estate investors expect to be net buyers in 2013

Initial Findings of Annual CBRE Investor Intentions Report Shows Reviving Appetite for Risk // Significantly Greater Interest in 'Good Secondary' and 'Opportunistic' Assets Reported

Global real estate advisor CBRE today revealed initial findings from its annual survey of European Investor Intentions ahead of MIPIM. The 2013 survey saw significant evidence of improving investor sentiment – both in terms of expectations around investment activity levels and the range of assets that investors will consider.

A clear majority (58%) of respondents said they expected their purchases in 2013 to be higher than in 2012. This compares with 45% giving the same answer last year. Within this, 30% of investors expect to be spending over 20% more on investment purchases in 2013 than they did in 2012. The proportion of investors intending to spend less this year than in 2012 dropped to just 6%; the comparable figure in the 2012 survey was 18%.

Further evidence of increased investor demand in European markets is given by the finding that 71% of survey respondents expected to be net investors with purchases exceeding sales. Again this is a stronger picture than last year when 61% of respondents indicated they would be net investors.

Respondents were also asked to rate their preferences across four types of asset of different quality and risk characteristics, indicating which they considered ‘most attractive’ for purchase and being able to select more than one. The order of investor preferences by asset type was the same as in the 2012 survey but with different weightings.

Core properties were selected by a majority (53%) of respondents as most attractive, a higher proportion than in 2012. However, there were larger increases in the proportion of investors indicating that ‘good secondary’ and ‘opportunistic/value-add’ assets were most attractive, in both cases rising to over 40%. The proportion favouring distressed assets was virtually unchanged at 22%.

These results indicate that, while there is still a bias towards prime/core assets, there is now significantly greater interest in opportunities further up the risk spectrum. This could reflect investors’ need and willingness to consider a broader range of assets as prime/core markets have become crowded and, in some cases, more expensive. It could also reflect an increase in risk tolerance with more positive investor sentiment generally in response to reduced uncertainties over the eurozone.

The conclusion that there is now growing investor interest outside prime/core assets is supported by the pattern of responses on the ‘single most preferred’ type of asset for purchases in 2013. Prime/core assets got the highest vote (42%), but a majority of respondents overall chose other asset types. Good secondary and opportunistic/value-add assets were each selected by 25% of investors as their most preferred asset type for purchase.

Jan Linsin: “The findings of this year’s survey reflect a more positive tone in investor sentiment. The responses clearly imply that investors are looking to commit more capital to European real estate in 2013 and there is potential for increased transaction volumes in the coming year. The implication is also that the trend towards greater investor interest and activity in secondary assets, evident since the final quarter of 2012 in some European markets, will gather pace during 2013. The next 12 months could mark the beginning of a reversal of the strong polarisation that has characterised European property investment markets over the past two years.”

Commenting on the potential implications of the recent Italian election for the market, Linsin added:
“The evidence of improved investor sentiment in the survey preceded the inconclusive Italian election result, which has now brought new uncertainties to the eurozone. However, the exact degree to which this will affect the positive mood of investors remains to be seen.”

The full results of CBRE's European Investor Intentions Survey, including responses on the regions, countries, cities and sectors seen as most attractive in 2013 by investors will be presented at the CBRE Global Investment Forum at 8.45h, Wednesday 13 March at Room Marta, Majestic Hotel, La Croisette, Cannes.

About CBRE’s 2013 European Investor Intentions Survey
CBRE’s online survey of European Investor Intentions is designed to provide high level insights into investor sentiment and preferences with respect to regions, countries, cities, sectors and asset types and the impact of key influences on investor attitudes and activity. In 2013, a total of 362 respondents completed the survey the study’s largest response to date. Just under half (48%) were classified as fund or asset managers; a further 8% were pension funds and insurance companies The other most numerous groups of respondents by type were private property companies (14%), listed property companies (11%) and private equity/venture capital companies (9%). Respondents were predominantly domiciled in Europe (87%). UK-based investors made up 31% of respondents with those based in Germany accounting for 24%. Respondents domiciled elsewhere in Western Europe comprised 26% of respondents with 6% based in CEE countries. The largest group of respondents based outside Europe originated from North America (9%).