Real Estate Investors Ready For More Risk
Friday, July 01, 2011

A recent survey of alternative investment consultants suggests that real estate investors now have a greater appetite for risk, with opportunistic, distressed and value-added funds being considered more attractive than core and core-plus funds.

The survey of more than 70 consultants from around the world by alternative investment analysts Preqin looked at current issues affecting the alternative assets industry, where the best opportunities lie, and investment plans for the next 12 months.

The survey results show that over two thirds (68%) of consultants believe North America will present the best investment opportunities in the coming year, while half think that there will be attractive opportunities in Asia. The consultants were slightly less enthusiastic about Europe and South America, with 38% and 35%, respectively, seeing good opportunities in these markets over the next 12 months.

They survey found that just over half of alternative investment consultants plan to invest more capital in private real estate than they did in 2010, while 20% are planning to invest significantly more capital to the asset class. Only 9% were found to be planning to invest less in real estate than they did last year, and none of the respondents said that they would significantly reduce allocations to this sector.

Asset valuation was cited as the main issue within the market at present, with 23% identifying this as a concern. Almost one-in-five (19%) of those surveyed think that the economic climate and volatility is an issue.

Dami Sogunro, Senior Research Analyst, Investment Consultants, commented:

"The private real estate market is showing evidence of year-on-year improvement from the nadir reached post-2008. Investment consultants and their private real estate investor clients will be looking to commit greater amounts of capital over the course of 2011 than in the previous year, particularly targeting opportunistic and distressed strategies in North America and Asia."

"However, despite the expected increase in investment activity, the private real estate market is still in recovery. Concerns with market valuations and possible volatility in the market remain and the opinions and investment plans of these investors are easily swayed by changes in the global economy."