Investors Shifting Focus
Major real estate investors such as asset management firms are shifting their focus on commercial real estate investment toward the United States from Europe.
For example, IGIS Asset Management is planning to invest US$900 million in U.S. assets such as logistics centers next year. The firm already has US$3 billion of assets in the United States and currently has no plan to increase its investment in Europe.
Until recently, those investors were very aggressive in the European real estate market. According to market research firm Real Capital Analytics, their commercial real estate acquisition in Europe amounted to 12 billion euros last year, when they were the second-largest buyer behind their U.S. counterparts.
The shift is because the rate of return is falling and competition is increasing in the European commercial real estate market. Specifically, their anticipated return fell from 6.5 percent to 4 percent from May to this month and pension funds and institutional investors in Germany, France and so on are offering higher prices to sellers.
Another reason is the ease of financing. “For the past several weeks, South Korean investors showed a clear tendency to finalize deals within this year, and they ruled out Europe during the course,” global law firm Dechert LLP explained, adding, “Instead, they focused on the United States, where foreign exchange hedging costs have decreased.”