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2018 sees flight to safety among international real estate investors

  • Appetite for high- risk commercial real estate strategies plummets by 24% over last 12 months
  • Low-risk, primary assets and liquidity-driven investments gain favour
  • UK-based real estate investors more risk averse than average

Sentiment among international commercial property towards high-risk real estate investment strategies has dramatically fallen over the past 12 months, according to BrickVest’s latest commercial property investment barometer (‘the Barometer’)[1].

Data from 4,000 international professional real estate investors shows a 24% year-on-year decline in sentiment from Q1 2017 to Q1 2018 towards high-risk property investment strategies such as opportunistic and speculative development.  Appetite for low and moderate risk strategies including core and core-plus has risen by 16% and 5% respectively. During the same period, investors’ projected allocation to real estate over the next 12 months has remained at 3.3% of total assets under management.

While capital growth and income remain the two leading investment objectives, support for liquidity has surged by 40% over the past year, suggesting that investors are increasingly focused on easier divestment should the market cycle begin to turn.

The Barometer shows that investors’ overall risk appetite has fallen by an average of 10% with favourability towards Secondary assets dropping by 9% and Prime rising by 6%.

The UK retains its top spot as Europe’s most popular commercial property market (31%) ahead of Germany (23%) and France (18%) despite slow progress on Brexit and lack of clear direction on the terms of the eventual split.

However, the findings suggest that UK investors have on average become more risk averse than in other markets; their appetite towards high-risk investment strategies has dropped by 33% (24% average); the importance of liquidity has risen by 55% (40%) and support for secondary assets has fallen by 12% (9%).

Emmanuel Lumineau, CEO at BrickVest, commented: “Commercial real estate markets are attracting record levels of capital but the Barometer strongly indicates that investors are becoming more attracted to lower risk strategies.  At this late stage in the cycle it’s likely that many investors will be looking to trim their exposure to higher risk assets and liquidity will become increasingly attractive, so they can be better protected should the market start to turn.  Whether more investors will join the flight to safety will be a key trend to watch over 2018.”

The full report is available at: http://brickvest.com/barometers

2018 sees flight to safety among international real estate investors
2018 sees flight to safety among international real estate investors