The rapid rise of alternative real estate and a spate of speciality IPOs is set to provide 'sizeable new liquid options' for listed property investors, according to new research released on Wednesday at the European Public Real Estate Association's (EPRA) annual conference in Berlin.
The research by Amsterdam-based advisory firm Kempen predicts 'a robust pipeline of listings in alternatives ahead' as growth clusters of European companies in areas such as logistics, healthcare and self-storage are expected to develop.
'The European speciality real estate sectors are growing at a much faster pace than traditional listed markets like offices and retail, because they represent a way to access some of the best real assets behind the great secular investment themes of our time, including ageing demographics and e-commerce,' said Dick Boer, head of real estate at Kempen Corporate Finance.
'Even based on very conservative assumptions, Kempen believes that we could easily see a doubling in the size of the market benchmark index within five years,' he said.
According to Kempen, along with German residential, speciality property firms are generally valued at a premium to the net asset value (NAV) of their underlying holdings, which allows them to raise capital to buy new assets and is a growth catalyst for equity listings.
Across the board, growth in the alternative property sector is forecast to drive a doubling in the size of the benchmark FTSE EPRA Nareit Developed Europe listed real estate index to around €500 bn within the next five years, from its current approximately €250 bn market capitalization.
'Even if we get rising interest rates, that is not going to affect expanding areas like e-commerce, or the need for healthcare accommodation based on ageing demographics, and will probably indicate solid economic growth, which is only positive for real estate,' Boer concluded.