Turbulence in the credit markets has not dampened real estate investors' enthusiasm for non-listed property funds, according to the INREV Investment Intentions 2008 report. Survey results, which comprised 112 company responses from investors, fund managers and fund of funds managers, reported that 82% of investors expect to increase their allocation to the non-listed sector in 2008 while the remaining 18% said their allocation would remain unchanged.
"Real estate investors recognize that the credit crunch is going to affect nonlisted property but taking a long term view they remain fully committed to the sector," said Georg Allendorf, Managing Director at RREEF and Vice Chairman of INREV's Management Board. "There are some changes to the results compared to 2007 which can be linked to the credit crunch, such as investors' views placing an increasing emphasis on corporate governance and market transparency. However, what we see from our members is a continuation of interest in funds that can capitalize on the present situation. Respondents are placing greater priority this year on manager quality and out-performance with the expectation that closer attention will be paid to the performance record of fund managers," said Allendorf. Access to expert management was the most frequently cited factor for investment into the sector.Current market conditions are also reflected in other survey results.
"All groups say that the relative importance of the fund manager's local presence has increased substantially, which reflects the view that current conditions demand greater local market understanding," added Andrea Carpenter, Director of Research and Market Information at INREV.
The survey explored possible disincentives for investing in non-listed real estate vehicles. A perceived lack of transparency and market information was listed as the leading obstacle for investors, fund managers and funds of funds. Significantly, though, all three groups see an improvement in his area. "INREV has been working really hard to improve transparency and market information and we hope that the survey results on these issues are a reflection of those efforts," said Allendorf.
France overtook Germany this year to become investors' preferred investment location for 2008, although fund managers and fund of funds managers selected Germany, which was last year's favourite among all three groups. Sector-wise, retail investments gained marginally in popularity, the office market continued to be seen very positively, particularly by fund managers. Investors plan to increase their allocation of capital to non-European investment vehicles over the next two years, with Japan, China and the US being the most attractive locations. Some respondents had also started to target South American countries such as Mexico and Brazil.