Who are the investors and where are they expanding?
The CBRE survey asked a total of 60 real estate investors what their hopes for the future are. 32% of respondents were asset managers, 27% developers, 22% fund managers and 18% private investors. The latter ratio can be said to be relatively high, as in 2019 this figure was only 9%.
In terms of investor destination countries, the survey shows some change: fewer investors said Hungary was their only main market, while more and more people also enter the Central European market (43%). Meanwhile, the proportion of investors who invest exclusively and exclusively abroad has continued to decline. The rate was 19% this year, up from 23% last year and 30% the year before. According to CBRE, the decline in the rate is due to restrictions imposed in the wake of the coronavirus epidemic, which have made it more difficult to do business internationally and capital flows, making investor activity much more fixed.
Where does the capital come from?
In the light of the above, it is not surprising that we can see further dominance of domestic capital in the real estate market, which has been able to strengthen its position in recent years (in 2019, 43% of invested capital was domestic, this year it is 51%). According to the announcement, the presence of domestic capital may increase even more in the near future. This will be led primarily by entities linked to the state (42% of the domestic real estate market capital can be linked to them), but we can also count on the growing activity of domestic real estate companies and fund managers.
The proportion of European investors has returned to its 2019 level (currently 38%) after rising slightly in 2020, while the proportion of capital coming from outside Europe has fallen significantly compared to before the epidemic: in 2019, 20% of capital came from outside the continent , this year only 11% (last year it was even less, the rate was 9%).
Before the pandemic, real estate market participants were uniformly optimistic about the future, but with the onset of the epidemic, this changed logically, and in 2020 investors were already pessimistic and optimistic to a similar extent.
The mood shifted back to positive territory this summer due to the silence of the epidemic and a faster-than-expected economic rebound. Only 4% of respondents expect a worse year next year, while 63% envision positive developments in the real estate market (and 33% expect similar performance). The big question, however, is how this optimistic mood is reflected in reality and whether a possible next wave of epidemics will not break the positive outlook.
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How much capital can enter the market?
In the first half of 2021, 550 million euros were invested in the market, which predicts that this year may finally surpass 2020, when around 1 billion euros arrived in the market in the form of capital invested. 72% of respondents also agree with this forecast.
The median value of expectations this year is € 1.1 billion, as 52% of respondents expect an investment of € 1-1.3 billion in the market (CBRE’s own forecast indicates € 1.3 billion).
20% of investors are in a particularly good mood, as they say the value of the capital injection could fall between 1.3 and 1.7 billion euros in 2021. With the latter value, the market would reach the pre-crisis level of 2019. By 2022, investors will be even more optimistic, as the median value of predictions is already rising to € 1.5 billion, with a significant proportion of respondents and 17% expecting more than € 2 billion in investments next year.
There is demand, only supply is uncertain
According to the survey, the buyer side in the market bounces back faster than the sellers: 36% of those surveyed would buy more than last year, while only 11% would sell more on the sellers ’side.
The imbalance could still cause significant market disruptions, exacerbated by the fact that 30% of sellers do not plan to sell at all.
However, this low propensity to sell is still higher than last year, when 58% of players had no plans to sell or were uncertain about timing.
The slow awakening of the supply side contrasts strongly with the recovery of the demand side: last year, 70% of those surveyed said the opportunity was not right for shopping, and this year, 86% plan to invest.
What real estate is the capital moving towards?
The composition of property types preferred by investors has undergone a significant transformation in recent years. Worst of all, the offices acted as the home office’s success shrouded the market in strong uncertainty:
while in 2019, 58% of investors invested in offices, while in 2020, 48, and in 2021, only 38%.
An interesting development within the office market is the growing popularity of properties for which additional amounts need to be spent on renovation.
Compared to the epidemic, logistics properties were clearly the winners in 2020, as 36% of investors turned to the asset – in 2019, only 22%. Interest, however, has dropped dramatically this year, as only 26% of investors have preferred industrial real estate. According to the announcement, this may seem strange at first, as the industrial real estate market is on a strong footing, but low supply is frightening investors.
Retail real estate is of low but stable interest – in 2019, 10% of investors preferred the property type, which fell to 7% as a result of the epidemic. This year, the situation normalized as the rate rebounded to 11%.
The real curiosity of the data set is the advancement of other property types among investors. Last year and the year before, only 10 and 9% of respondents had invested in the asset type, this year the proportion has dropped to 26%.. Among other properties, hotels and residential properties are the most popular, with a 30-30% preference – the former is perhaps a little surprising in this uncertain epidemic, but on the one hand some of the hotels now built and sold started before the epidemic broke out, on the other hand, thinking for decades that the epidemic will alleviate, tourism will certainly recover as well.
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