Offices top the list of preferred sectors for investors with industrial / logistics and residential ranked equal second. Funds of funds rate office, industrial / logistics and residential equally at 80 per cent. Compared with 2019, investors from Asia Pacific, Europe and North America all show a substantially increased preference for the European industrial / logistics sector.
The poor performance of retail over recent years seems to have impacted its ranking. European investors have signalled retail as their fourth preferred sector at 50 per cent. Investors in North America also rate it fourth at 43 per cent, as do those in Asia Pacific (31.3 per cent). Only 10 per cent of funds of funds express a preference for the retail sector.
The four top combined country/sector preferences for investors are France office, Germany office, Germany industrial/logistics, and UK office. For the first time since 2012, UK retail failed to make the top 10 preferred combinations for investors.
Investors in all three main regions share a common belief that ‘access to expert management’ is the main motivation for investing in non-listed real estate funds. However, the most significant barrier varies according to domicile. For investors in Europe it is ‘availability of suitable product’ (50 per cent); North American investors have identified ‘currency risk exposure’ (64 per cent); and their counterparts in Asia Pacific see ‘transparency and market information’ (64.3 per cent) as the biggest challenge.
Lonneke Löwik, INREV’s CEO, says: ‘These findings point to a curious mix of investor sentiment. The continued lower interest rate environment looks like being an important driver for 2020, as investors seek returns from real assets including real estate; and the shortage of core assets is driving investors further up the risk curve. Interestingly, while investors in North America have long had an appetite for opportunity style investments, their counterparts in Asia Pacific who have tended to be more cautious in the past, are also now slowly moving up the risk curve. As global capital continues to flow, off-shore investors are increasingly looking for local partners, further stimulating the focus on non-listed real estate.’
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