Investors in European real estate still need to tread carefully. That was the view at MIPIM this week where an abundance of equity raised the questions: Where 鈥� and when 鈥� to spend it?
Despite rising optimism for the continent鈥檚 commercial real estate sector, Hermes Real Estate fund management director Ben Sanderson urged caution. Speaking on a panel hosted by Asset Management, Sanderson said: 鈥淭here are still a lot of challenges in Europe 鈥� we鈥檇 be deluding ourselves if we think all is okay.鈥�
Sanderson said the UK, for example, had experienced little rental growth over the last 30 years. As a lender, Sanderson said debt, with returns of 4% to 5%, was a better play than direct real estate.
Voicing a preference for UK secondary markets and Germany, Adam Cibik, portfolio manager at the Employees Retirement System of Texas, said there was still relative value in Europe, which was 鈥渉alf a cycle behind the US鈥�. With Spain the 鈥渇lavour of the month鈥�, Cibik said there was a risk of raising investors鈥� expectations too high.
When compared with Asia 鈥� a significant source of money 鈥� Europe still offers value. Citing the example of Taiwan, Gordon Marsden, director of investment and advisory in Asia Pacific, said: 鈥淲ith yields as low as 2.5% in their home markets, everything in Europe looks comparatively cheap.鈥�
Almost 80% of respondents to a PwC/Urban Land Institute report predict that capital from Asia will rise this year.
Optimism for European property could lead to 2014 being the 鈥渓ast chance鈥� to invest, said PIMCO Europe鈥檚 head of commercial real estate Laurent Luccioni.
