The benefits of investing in real estate have long been recognized by investors based in Europe, with many turning to the asset class to generate stable and attractive returns. At present, investors based in Europe allocate €1.1tn to real estate, representing almost half (46%) of the total capital committed globally.
Preqin’s Real Estate Online currently profiles 278 active Switzerland-based real estate investors, which collectively allocate €217bn to the asset class – the highest amount of any individual European country. This is followed by the Netherlands, where 134 investors have an aggregate current allocation of €159bn.
Compared to institutions in the Netherlands, Switzerland-based investors are more diversified by institution type: private sector and public pension funds represent the largest proportions (29% and 20% respectively), with family offices (13%), wealth managers (12%) and asset managers (12%) rounding out the top five. Contrastingly, more than half (58%) of active Dutch investors are private sector pension funds, mainly due to quasi-mandatory pension arrangements in the country.
As seen in the chart above, APG – All Pensions Group is currently the largest real estate investor based in the Netherlands, with €41.3bn allocated to the asset class. This figure accounts for just over a quarter (26%) of all capital committed to real estate in the country, with the top five investors combined representing 59% of committed capital. Meanwhile, Swiss Life – the largest real estate investor in Switzerland – has €26.6bn allocated to real estate. The top five investors combined represent 30% of Switzerland-based institutional investors’ aggregate allocation to real estate.
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Forty-nine percent of Netherlands-based investors favour listed real estate investment, compared with 30% of investors in Switzerland, and 69% of Switzerland-based LPs gain exposure through direct investments, compared with 39% in the Netherlands.
Private real estate funds are commonly utilized by both Switzerland- and Netherlands-based investors (61% and 74% respectively). A larger proportion of investors in the Netherlands favour funds that focus on core property than their Switzerland-based counterparts (84% vs. 66% respectively). However, the reverse can be said for both value added and opportunistic funds, which are favoured by 40% and 38% of investors in Switzerland respectively vs. 36% and 33% in the Netherlands.
Investors in both countries have shown a clear preference for domestic private real estate: 94% of Netherlands-based LPs and 91% of Switzerland-based investors favour Europe-focused funds. However, investors in the Netherlands are exhibiting a growing appetite for North America- and Asia-focused funds, and 36% of Switzerland-based investors target funds with a global reach compared with 18% in the Netherlands.
Real estate remains an important asset class within many investors’ portfolios: 89% of the Europe-based LPs surveyed in December 2016 for Preqin’s Investor Outlook report expressed an intention to maintain or increase their real estate allocation in the next 12 months. Despite this, under half (41%) expect to have trouble in identifying attractive investment opportunities. As it stands, Netherlands- and Switzerland-based LPs are both under-allocated to real estate; with respective target allocations of 9.3% and 21.8%, and current allocations of 7.5% and 19.6%, we may see investors inject further capital in real estate over the coming years to reach their targets.