More than two thirds (37%) of European investors are planning to decrease allocations to real estate between 2023 and 2024, according to new research from a trio of sector trade bodies.
The degree of pull back contrasts sharply with investors elsewhere in the world with their North American and Asian Pacific peers butting by 20% and 5% respectively.
The current average allocation to real estate globally is 10.2%, only slightly below the average target allocation of 10.4%.
How this might impact hospitality specific investment is difficult to deduce but an early look at our latest Hospitality Insights Investor Sentiment survey showed a strong focus on hospitality and its subsectors relative to other asset classes with the likes of extended stay and co-living offerings likely to prove attractive.
The prevailing mood of caution has prompted a return to core as the preferred investment style for 2023. European investors are once again the most risk averse, with 57% opting for core when investing in their region. They also have the lowest preference for opportunistic strategies, at just 8%. In Europe, the shift to core resembles the pattern seen in 2008 and 2009 – albeit, less sharp.Interestingly, Asian Pacific investors targeting Europe reported a substantial increase in preference for opportunistic strategies, perhaps looking to increase their European portfolios at a discount.
There is broad consensus from investors across all regions that inflation, interest rate policy and geopolitical risk are impacting investment decision-making the most.However, there are strong differences of opinion when it comes to assessing the importance of ESG factors. Over 90% of European investors say that a fund’s commitment to net zero carbon is a key consideration in real estate investment decisions, compared to nearly 70% of their peers in Asia Pacific and 0% of those in North America.