Global real estate fund managers are positioning themselves to find “opportunities after the storm”, with most looking to increase their exposure to UK real estate.
A survey by Alvarez & Marsal of 101 fund managers and investment professionals from 15 countries in Europe, North America and Asia found 56% of investors feel optimistic towards the outlook for UK and European commercial real estate investments over the next 12 to 18 months. A third feel indifferent and only 11% feel pessimistic.
Half of those surveyed are investing in the UK and Western Europe and some 70% of those plan to increase that exposure. The survey found 75% plan to increase their exposure to the Nordic markets.
Funds in the survey, which include institutional capital, private capital firms and sovereign wealth funds, have an average of $62.5bn (£49bn) assets under management and were quizzed on their outlook in November. They favour developed markets, with 45% investing in North America, 34% in Asia and 1% in the Middle East.
Their responses highlight cost of capital and investment returns as the areas they are most optimistic about: 62% expect the cost of capital to improve and 59% expect investment returns to improve as a result.
Over the next 12 to 18 months, the survey found that 87% of fund managers are looking to invest in hotels and leisure, 71% in office buildings and 67% in retail.
The report says: “The office segment may offer choice opportunities for contrarian investors before the market reawakens, as asset valuations remains depressed and credit concerns persist.”
The care home and assisted living sector was seen as a priority by only 23% of investors.
The survey also found that investors are nearly unanimous in their views on ESG, with 97% saying it forms an important part of their investment strategy. Energy-efficient upgrades, smart building technology and green building certifications are the key focus areas for ESG-oriented investors.
Kersten Muller, managing director at Alvarez & Marsal, said: “The growing consensus that interest rates have peaked suggests that the worst of the uncertainty may be behind us. While this could pave the way for a rebound in the real estate sector in 2024, investors should continue to exercise caution when evaluating the types of properties and markets they deem worthy of their capital.”
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