Investors and agents were broadly optimistic about the outlook for real estate at Expo Real in Munich last week, where the number of attendees hit a record high of 44,536 people.
The continuation of Asian investment in Europe, led by South Korea, was seen as a strong indicator of the resilience of the continent’s real estate market.
“There is an oversupply of capital and real estate is still the best asset class,” said Cushman & Wakefield’s head of APAC cross-border capital markets, Argie Taylor.
The appeal of real estate was demonstrated by research unveiled by Cushman & Wakefield at the trade show revealing that global real estate investment had risen 18% in the 12 months to June this year, hitting a record high of $1.8trn (£1.4trn).
As pricing becomes increasingly keen, Taylor noted that investors were increasingly happy to take on more risk to achieve higher returns. “The most attention is now going to value-add strategies, as investors reposition from core,” he said.
For those who are more wary of the uncertain macro-economic climate, debt continues to be a popular way to gain exposure to real estate. As a result, lenders are finding the market increasingly competitive.
“It’s a borrower’s market; there’s more choice,” said CBRE’s head of UK and EMEA debt and structured finance Paul Coates. “We recently had 12 lenders looking to finance a whole loan of over £200m offering similar types of protection – that’s more than £2.2bn looking to be deployed.”
Logistics continues to grow
One topic that dominated the conference halls was the seemingly unstoppable rise of the industrial and logistics sector in the UK and Europe.
The growth of ecommerce is widely expected to support strong demand for both large-scale logistics hubs and smaller warehouses.
AEW chief executive Rob Wilkinson said: “We expect to see more last-mile warehouses in urban centres across Europe and possibly more high-rise logistics facilities.”
Wilkinson added that he was more optimistic than others about the current state of the retail market. “Retail is facing the perfect storm with very negative market sentiment, which I feel is slightly overplayed,” he said.
Attendees were cautiously optimistic about the outlook for the UK despite fears over Brexit. In a no-deal scenario, some agents and investors said the likely resulting fall in the value of the pound would make the UK an attractive investment opportunity.
However, some fund managers said other markets were benefiting from the UK’s decision to leave the EU.
“I’m torn,” said the head of finance for one Irish property investment fund. “Brexit is great for the fund but terrible for my country.”