German institutions prefer indirect investing in commercial real estate, according to a survey.
Berlin-based Rueckerconsult鈥檚 study of 100 institutional investors found a preference for indirect investments, with 28% of respondents looking to increase their share on indirect holdings.
Only 19% are looking to increase their share, while 26% of respondents are planning to invest exclusively in indirect investments.
Thomas R眉cker, managing director at Rueckerconsult, said: 鈥淩eal estate special funds are the number one investment vehicle, but German investors prefer to stick together. As the need for security remains high, expected returns are low.鈥�
Rueckerconsult said most special fund investors preferred a minimum of 2-10 co-investors, with the majority preferring between one and three.
鈥淭hey also have specific ideas about what type of co-investors they want,鈥� R眉cker said.
The survey found 45% of respondents could imagine investing with German pension funds, retirement funds or other pension funds, while 20% expect to partner German insurance companies.
鈥淭hey were especially averse to non-German investors, particularly international private equity funds and international government funds,鈥� R眉cker said.
Institutions 鈥渄o not tend to stray from the beaten track鈥�, despite the pressure to invest, according to the firm.
The survey found little interest in alternative investments, such as real estate bonds, convertible bonds or credit funds.
Only 14% said they would include bonds of real estate companies in their portfolio, while only 8% would be willing to buy convertible bonds of real estate companies.
Respondents鈥� focus is still largely on major German cities 鈥� particularly for investment in the office sectors.
Most investors 鈥� around 74% of those surveyed 鈥� continue to focus on office and retail property.
Around two-thirds of respondents target an average rental return of 4-5%.
Only 7% target returns above 6%.
