Significant allocations planned for non-listed funds; ESG gains momentum in investment decisions
12 January 2022, Amsterdam – Institutional investors plan to invest at least €60.1 billion* into global real estate this year, according to the 2022 Investment Intentions Survey published today by ANREV, INREV and PREA. The majority of this new capital comes from European investors (61%*), whilst their counterparts from North America and Asia Pacific account for 14%* and 25%* respectively. Funds of funds expect to commit a further €7.4 billion*, taking the total to at least €67.5 billion*. Of this total, €25.9 billion* is expected to be invested in European real estate over the next two years.
At a global level, 62% of the surveyed investors said the COVID-19 pandemic would not impact their investment plans for 2022. With a gap of 120 basis points between current (8.9%) and target (10.1%) allocations to real estate, institutional capital looks set to continue to flow into the asset class during the coming year and 61% of all surveyed investors expect their allocation to real estate to increase over the next two years.
In 2022, 38%* of planned capital deployments is targeting Europe, 39%* (The United States) and 21%* Asia Pacific. Of the total expected volume of institutional investments this year, 41% is earmarked for non-listed real estate funds and 30% is planned for other non-listed real estate vehicles.
Shift in risk appetite
While historically investors have allocated most of their capital to core strategies – currently accounting for 83% of institutional portfolios – respondents demonstrated a notable uptick in risk appetite for new investments in 2022. This is particularly pronounced amongst investors targeting Europe, with over half (57%) of respondents indicating a shift in preference toward value added strategies – the highest it has been since 2008. Conversely, only 30% preferred core strategies, down from 50% last year. Opportunistic strategies are preferred by 13% of respondents targeting European real estate.
Preferred geographic destinations
For investors seeking opportunities in Europe, France (74%), Germany (71%) and the UK (69%) – the most mature and liquid markets – are once again the top three preferred destinations. France’s score is considerably higher than the long-term average of 68% and marks continuing positive momentum
for the market. Nonetheless, all three countries scored lower than last year, reflecting greater geographic diversity of investor preferences, in line with the general shift toward value added strategies.
Spain, the Netherlands, Denmark, Finland and Norway scored higher than in 2021 and above their long-term averages. Much of the appetite for these countries comes from European investors, while their counterparts in North American and Asia Pacific continue to favour the UK and, to a lesser extent, France and Germany. Spain stands out with a significant uplift in investor preferences from 45% in 2021 to 62% in 2022, putting it in fourth place overall behind the UK. Spain is the only second tier destination to be equally preferred by both European and cross-regional investors.
Sector preferences and deployment
For the first time in the history of the survey, investors selected industrial/logistics as a single top sector choice at 71% when investing in Europe, placing it ahead of offices and residential – both on 69%. It was the only sector in Europe to surpass its seven-year average score (67%), with growth likely coming on the back of excellent performance results for the sector driven by increased demand for logistics space during the COVID-19 pandemic. This is in sharp contrast to offices and retail which were 15% and 23% down from their long-term averages, with the remaining sectors more or less on par. Retail climbed back up from fifth to fourth place at 36%.
Conversely, while the office sector is the largest component of existing real estate portfolios, it is far less popular for new investment with only 20% of capital likely to be deployed into the sector this year globally. Continued uncertainty concerning the future of office working seems to have dampened investor interest. Of the mainstream sectors, retail is the least popular for new investment, accounting for only 8% of planned deployments overall in 2022. However, retail is more popular among Asia Pacific based investors for whom it is expected to attract 18% of new investment capital.
ESG front and centre in investment decisions
ESG is set to be a key factor in investment decisions in 2022, gaining momentum across all regions. Globally, 68% of investors consider a Net Zero Carbon commitment to be an important feature when investing in a non-listed real estate fund, and 86% of investors surveyed pay close attention to a fund’s environmentally and/or socially responsible investments. Emphasis varies by region, but Asia Pacific, given the dominance of Australian investors in the sample, stands out with the highest proportion of investors (100%) indicating that ‘promoting ESG is important’. For investors in Europe and North America the scores were 79% and 56%, respectively. Diversity, equity and inclusion (DEI)
are also important to real estate investors, with 66% overall taking a fund’s DEI programme into consideration when investing.
Diversification benefits remain key
Investors in Europe and North America identified the diversification benefits of real estate in a multi-asset portfolio as the main reason for investing in the asset class. For those in Asia Pacific the key attraction is real estate’s ability to enhance portfolio returns. Inflation hedging is ranked as the least important factor in all regions, despite the current increase in inflationary pressures.
Iryna Pylypchuk, INREV’s Director of Research and Market Information said: ‘The 2022 Investment Intentions Survey is a powerful reminder of the investment appeal of real estate as an asset class, with the diversification benefit it offers in a multi-asset portfolio remaining the key driver of growing allocations. It’s a helpful indicator of how and where investors plan to allocate new capital, highlighting broadening in geographic and sector preferences, especially amongst European investors, beyond core markets such as France, Germany and the UK. Access to expert management and specific sectors are cited as key reasons for investing via non-listed real estate funds. The latest results reveal intriguing shifts towards value added strategies as well as the growing importance of ESG considerations, prepping the global real estate investment industry for an interesting coming 12 to 24 months.”
*Correction notice 25 Jan: Since publication, this figure has been changed
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For further information, please contact
Johlyn da Prato, johlyn.daprato@inrev.org | +31 (0) 621397456 Justin St Clair-Charles, inrevteam@firstlightpr.com | +44 (0) 7769 644 059 Josie Workman, inrevteam@firstlightpr.com | +44 (0) 7460 325 392
Notes to Editors
About the Investment Intentions Survey 2022
The Investment Intentions Survey provides insight into expected trends in the real estate investment industry in 2022. It explores aspirations for investment over the next two years, with a focus on non- listed real estate funds.
The survey is a joint project between INREV, ANREV and PREA, so providing a comprehensively global perspective. It is published once a year in January.
This year’s survey is based on data from 99 respondents globally with a combined total AUM of at least €799 billion.
About INREV
INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, was launched in May 2003 as a forum for institutional investors and other participants in the growing non-listed real estate vehicles sector. The association represents and reflects an industry with a total value of €2.8 trillion and INREV members deliver €385 billion of stimulus to the real economy of Europe.
INREV has 467 members which include 113 of the largest institutional investors as well as 40 of the 50 largest real estate fund managers, plus banks and advisors across Europe and elsewhere.
The non-profit association is focused on increasing the transparency and accessibility of non-listed vehicles, promoting professionalism and best practice, and sharing knowledge. It is based in Amsterdam, the Netherlands.
About ANREV
ANREV is the Asian Association for Investors in Non-Listed Real Estate Vehicles, a not-for-profit organisation based in Hong Kong. ANREV's agenda is driven by the members, in particular the investors, and is focused on improving transparency and accessibility of market information, promoting professionalism and best practices, sharing and spreading knowledge. Fund managers, investment banks, lawyers and other advisors provide support in addressing key issues facing the Asian non-listed private equity real estate fund markets.
ANREV is part of a global alliance together with the European Association for Investors in Non-Listed Real Estate Vehicles (INREV) and the National Council of Real Estate Investment Fiduciaries (NCREIF), which works with the other regional associations to advance the global agenda of transparency, accessibility and professionalism and increased harmonisation across the non-listed real estate industry. http://www.anrev.org
About PREA
Founded in 1979, the Pension Real Estate Association (PREA) is a non-profit trade association for the global institutional real estate investment industry. PREA currently lists over 700 corporate member firms across the United States, Canada, Europe and Asia. Our members include public and corporate pension funds, endowments, foundations, Taft-Hartley funds, insurance companies, investment advisory firms, REITs, developers, real estate operating companies and industry service providers. http://www.prea.org