The coronavirus crisis has led to a significant shift in the investment strategies of institutional real estate investors. “Lower risk, lower return” is the mantra of the moment. 58% of the 150 professional investors in Germany, France and the UK surveyed by Union Investment for its investment climate study are currently pursuing such a strategy. The figure was just 35% prior to the outbreak of the pandemic. The shift is especially pronounced in the UK, where security is the main investment motive for 79% of those surveyed. Before the pandemic, it was 50%. Nonetheless, there is no general reluctance to invest. Only five% of the European investors in the survey intend to avoid all investment in real estate in the current phase.
The coronavirus pandemic has also triggered a significant shift towards climate-friendly investment by institutional investors, with 54% of respondents planning to invest more in this segment. 49% are aiming to acquire more core properties as a result of the virus, while 42% indicate that they will be investing more in their own country. This change in emphasis is particularly strong in France: 71% of French investors are planning climate-friendly investment, 65% intend to buy core properties and 59% are choosing to invest increasingly in their domestic country.
The UK, in contrast, has seen a less marked change in investment focus due to the coronavirus pandemic. The study found that only 31% of respondents intend to focus more on climate friendliness, 36% on core real estate and a mere 14% plan more investment in their own country. However, 43% of UK investors intend to invest more heavily in other property types. Overall, 41% of the institutional investors covered by the survey plan to do likewise.
Health care and logistics are the most favoured asset classes among European investors in the current market phase. 65% of respondents expect that more capital will be channelled into these categories. “Both these property types are less prone to crises and help to stabilise cash flow in a portfolio,” said Olaf Janßen, head of Real Estate Research at Union Investment. Having said that, the residential asset class also remains attractive: 55% of survey participants anticipate rising inflows into this segment.
The majority of European real estate investors (57%) expect the German property market to recover fastest from the coronavirus pandemic. The Berlin and Frankfurt markets in particular are rated highly by respondents: 42% believe the German capital will make a rapid recovery, while 38% cited Frankfurt. The real estate markets in Paris (30% of respondents), London (29%) and Stockholm (23%) are also considered to have good chances of recovery. The study indicates that the markets in Milan (55% of respondents), Madrid (47%) and Barcelona (33%) are likely to struggle with the consequences of the pandemic for longer.
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