Investment climate: Significant changes in investment strategies

The coronavirus crisis has led to a significant shift in the investment strategies of institutional real estate investors. “Lower risk, lower return” is the mantra of the moment.

58 percent of the 150 professional investors in Germany, France and the UK surveyed by Union Investment for its investment climate study are currently pursuing such a strategy. The figure was just 35 percent prior to the outbreak of the pandemic. The shift is especially pronounced in the UK, where security is the main investment motive for 79 percent of those surveyed. Before the pandemic, it was 50 percent. Nonetheless, there is no general reluctance to invest. Only five percent of the European investors in the survey intend to avoid all investment in real estate in the current phase.

The coronavirus pandemic has also triggered a significant shift towards climate-friendly investment by institutional investors, with 54 percent of respondents planning to invest more in this segment. 49 percent are aiming to acquire more core properties as a result of the virus, while 42 percent indicate that they will be investing more in their own country.

Health care and logistics are the most favoured asset classes among European investors in the current market phase. 65 percent of respondents expect that more capital will be channelled into these categories. “Both these property types are less prone to crises and help to stabilise cash flow in a portfolio,” said Olaf Janßen, Head of Real Estate Research at Union Investment. Having said that, the residential asset class also remains attractive: 55 percent of survey participants anticipate rising inflows into this segment. 

The majority of European real estate investors (57 percent) expect the German property market to recover fastest from the coronavirus pandemic. “Germany benefits from its economic strength and the government’s successful crisis management to date. Berlin and Frankfurt, like other German locations, have a modest pipeline of new office space, giving them a good chance of getting back to normal faster,” added Janßen.

Title image: Getty Images

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