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Europe: the centre of (investment) attention

Mike Keogh

Can European investment continue to buck economic sentiment? Michael Keogh, Associate Director of Research & Strategy, discusses the flow of capital into Europe.

As the Eurozone economy teeters on the brink of another downturn, many column inches will be dedicated to the debate of whether it is a hiccup in the long, slow road to recovery, or a sign that governments and central banks need to do more to generate and sustain market confidence.

It would seem, however, these concerns have not been at the forefront of global real estate investment managers’ minds as they are keen to deploy capital early in the cycle to capture performance.  According to annual figures to September 2014 from Real Capital Analytics (RCA), Europe has recorded positive net real estate investment from all the other continents.  Looking forward, this trend will be tested, unless Europe can return to growth and enable occupier markets to recover sufficiently to justify the intensity and direction of recent capital flows and the associated price adjustment. 

But global real estate allocations need to be understood in a wider context with an understanding of market conditions at the capital’s origin.  Accounting for some degree of currency exposure, what is deemed expensive in one market (Europe) can look attractive for another (Asia), and assist in a growing need for diversification.  As changes in regulation enable more players to enter the real estate market, and the volatility and price of equities and bonds continues to spook investors, greater allocations to commercial property have the potential of keeping real estate pricing keen in the near-term, even if growth is disappointing.

Europe investments

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Michael Keogh

Mike Keogh

Director of Research

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