European listed property entities are likely to see greater inflows of capital in coming months as they continue to outperform the rest of the equity markets, EPRA said today.
Inflows through IPOs meant the sector was “punching significantly above its weight”, the European trade body said.
The property sector accounted for 13% of all IPO activity, according to EPRA, with €7.6bn (£5.5bn) of capital raised for new listed property vehicles. This outweighed its 1.4% share of the FTSE European Equities Index.
In total 2014 saw €12.5bn of equity raised for listed property companies. So far in 2015, another €10bn on top of that figure has been raised.
One of the causes for this growth was the attractiveness of real estate yields over other long-term investments such as government bonds and general equity indices, EPRA said.
The average dividend yield across the FTSE EPRA/NAREIT Global Real Estate Index companies has been 3.3% for the past three years. This compares with near zero and even negative yields for European government bonds.
Philip Charls, chief executive of EPRA, said: “European listed real estate companies have been extremely popular with investors globally, and this is not just a case of a rising equities market tide lifting all boats. The industry has punched far above its weight in capital raising in comparison with most other stock sectors.
“Low interest rates and strong dividend yields obviously have a lot to do with the bullish picture, but our members also own many of the best-quality real estate assets in the recovering markets of Europe’s cities. Furthermore, we’re seeing strong structural growth in relatively new emerging listed property markets such as Germany, Spain and Ireland. All the conditions are now in place for the European listed sector to come of age.”
The success in capital raising in Europe has helped push its share of the FTSE EPRA/NAREIT Global Real Estate Index up to 18%, close to its long-term average of 20%. This follows a fall to 12% in 2012 – when the EPRA conference was last in Berlin – at which time returns in the US and Asia made the European markets less relevant in investors’ eyes, according to EPRA.
Germany reported particularly strong growth in the intervening period with its share of the European market rising to 16% in 2015 from 7.5% in 2012. It is Poland, however, that EPRA predicts will be the fastest-growing market over the mid-term as the first REIT is launched later in 2015 following lobbying by EPRA officials to the country’s government.
Charls said: “The European listed real estate industry has experienced remarkable growth over the past three years, and as national economies continue to recover we expect the sector will maintain its momentum of expansion. We must not, however, become complacent and abandon the investment discipline that has been put into place since the financial crisis and that has underpinned the support of investors.”
