ALTERNATIVES

Real estate investment expected to rise 13% in 2016 with largest focus on Europe

Investors are expected to commit at least €48 billion ($52.4 billion) to real estate this year, an increase of almost 13% compared with 2015 expectations.

The latest Investment Intentions Survey, published in collaboration by the European Association for Investors in Non-listed Real Estate Vehicles, the Asian Association for Investors in Non-listed Real Estate Vehicles and the Pension Real Estate Association, found the average global investor aims to have a 10.3% allocation to real estate over the next two years. The current average allocation is 9.4%.

Investment intentions vary across regions, with European investors targeting 11.4% overall, vs. 9% in North America. Asia-Pacific investors are targeting a 9.8% allocation to real estate over the next two years.

The survey attracted 345 responses from 130 investors, 15 fund-of-funds managers and 200 money managers. These respondents represented combined assets of almost €2 trillion.

Pension funds responding to the survey said they were targeting 11% allocation to real estate over the next two years, with insurance companies looking for a 6.9% allocation. Among all investors, 53.3% expect to increase their allocations to real estate over the next two years.

In terms of geography, European and North America-based investors are expected to make up about 40% each of the total capital that is intended for real estate this year. The remaining 20% is set to be invested from Asia-Pacific investors.

The majority of this investment, 41.9%, is set to be put to work in Europe. About 35.5% will be deployed in the U.S., 16.9% in Asia-Pacific, and 5.6% in the Americas ex-U.S.

Europe was also the favored investment destination for fund-of-funds managers, with an intention to deploy 59.3% in the region. The U.S. is expected to receive 20.2%; Asia-Pacific, 18%; and the Americas ex-U.S., 2.8%.

The survey was conducted in October and November.