Nearly two thirds (64%) of institutional investors believe the biggest investment opportunities will be found in the office sector over the next 12 months, according to a new study with 103 property-focussed institutional investors by BrickVest, the real estate investment platform. This represents a significant increase from the same study in October 2016 where just one in five (20%) selected this option.
BrickVest’s study showed that two in five (42%) institutional investors thought the industrial sector would present the biggest commercial real estate investment opportunities over the next 12 months, down from 44% in October. Three in ten (30%) selected the hotel sector, up from 20% last year, and a quarter (24%) cited the retail & leisure sector, down from 27% last year.
The research revealed that half (48%) of institutional investors are planning to increase their allocation to commercial real estate over the next 12 months. Just 8% said they would decrease it. Nearly two in three (64%) institutional investors believe the number of real estate investment opportunities will increase over the next five years.
Emmanuel Lumineau, CEO at BrickVest, commented: “Through our online real estate investment platform we are already seeing opportunities for investors in the UK and European real estate market, especially in the form of debt like investment opportunities which offer good risk adjusted returns in a volatile market environment. Since the Brexit vote in June, we’ve seen a 72% increase in the number of investors joining the platform.We expect to see the highest level of volatility from the office sector as many international firms currently headquartered in the UK may put decisions on hold over their long term office space requirements. If the UK no longer gives businesses access to the European market, they may need to spread their staff across multiple locations to more efficiently access both the UK and European market.”
The study identified the main challenges that institutional investors face when investing in commercial real estate. Nearly half (48%) suggested it was lack of liquidity while 42% pointed to the initial fee being too high. Two fifths (40%) highlighted high regulatory and compliance reporting costs, while the same number said they couldn’t find projects that matched their criteria (e.g. location, risk, investment return).
