With the growth of e-commerce continuing to benefit the sector, a third (33%) of respondents in Europe expressed a preference for industrial property, reaffirming its status as an institutional asset class.

Office was ranked second, favoured by 26% of respondents, with investors seeking markets with strong economic fundamentals to underpin rental growth and high levels of liquidity. Residential was the preferred asset class for 21% of EMEA respondents.

Jack Cox, head of EMEA industrial and logistics capital markets, commented: ‘2017 was the year the industrial and logistics sector was unquestionably re-rated, evidenced by the number and scale of platform deals we saw in the sector. Logistics yields remain at a premium over other real estate sectors, and the sustainability of returns in the sector is underpinned by a robust occupational market, which is attracting investors from around the globe.’

Portfolio deals
A defining feature of the market last year was the rise in sales of large portfolios, specifically ‘platform’ deals. Notable transactions in Europe included Blackstone’s €12.2 bn sale of the Logicor portfolio to Chinese SWF CIC and Brookfield’s $2.8 bn sale of IDI Gazeley to Global Logistics Properties.

Not only did the purchasers, typically large Asian investors, access the market at scale, but by buying an operating platform they also acquired the infrastructure and management expertise to manage the assets and continue to develop the portfolio, CBRE said.

Driven by aggressive asset pricing and limited availability of core stock, investors globally have become increasingly resourceful in finding innovative ways to deploy capital, according to the report. In EMEA, 72% of respondents indicated that they were already invested in alternatives and 70% said they were actively pursuing opportunities in the sector.

Growth in alternatives
Alternatives have seen a 45% increase in investment volumes in the last 10 years, resulting in €23.6 bn of transactions in 2017. Investors are most frequently targeting student housing (53%), retirement living (38%) and real estate debt (37%), an area where they are looking to increase exposure in 2018.

In addition to sector preferences, the survey also examined investors' geographic priorities. Paris, Madrid, Amsterdam, Frankfurt and London were the five most sought-after destinations in Europe for European investors. Paris jumped from fifth to first place, compared to 2017, boosted by expectations that the political and economic momentum from H2 2017 will have a positive impact on the real estate market.

London remains the top target for investors outside of Europe and will undoubtedly continue to see the highest volume of investment activity of any European city, despite Brexit, CBRE noted.

Shift in sentiment in France
‘While sentiment does not always translate directly into investment volumes, investor preferences do indicate which markets may see heightened activity over the next 12 months,’ commented Jonathan Hull, managing director of EMEA investment properties at CBRE. ‘We have seen a shift in sentiment in France for many months now, following the election of President Macron and the subsequent economic momentum this has created. Madrid has seen strong investor interest thanks to improving economic fundamentals. Limited development activity and declining vacancy rates in Amsterdam have boosted its appeal over time. The current strength of the German economy and the lack of supply continue to drive investor demand in all of its key markets.’

Despite 2017 being a record year for real estate investment in Europe, with volumes totalling €291 bn, European investors expect to deploy more capital in 2018 than they did in 2017, according to the survey.

A third of EMEA investors (33%) expect to spend more this year than last, compared to 26% last year. At a global level, 45% of investors anticipate committing more capital to real estate. However, as in 2017, availability of product remains a primary concern for investors in 2018, proving to be the biggest obstacle for 34% of European respondents, a challenge that investors are facing around the globe.