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.

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.

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