After the post-pandemic revival, 2022 was a year marked by caution and consolidation in the real estate market.

Deal volumes slowed down soon after the outbreak of the war in Ukraine, which ushered in a period of economic uncertainty and high inflation that forced central banks to raise interest rates. Despite these challenging conditions, PropertyEU’s annual survey shows the Top 100 investors in Europe grew their assets under management by nearly 5% over the year. This was particularly true of the biggest players, with 21 of the top 25 increasing the value of their AUM or staying level.

There is little movement at the top of the ranking, which is headed by Swiss Life for the fourth straight year. German landlord Vonovia holds on to second place, even though it was the only investor in the top 10 whose AUM declined. After the mega-merger with Deutsche Wohnen, last year was a much quieter year for Vonovia, which ruled out a further acquisition of Adler Real Estate and focused on working through a ‘roadmap’ of selective divestments.

AXA IM Alts and Blackstone, in third and fourth position, achieved growth of 9.8% and 11.8% respectively, with Pimco Real Estate moving up into fifth. The relative strength of the heavyweight players is best illustrated by the fact that CBRE Investment Management fell from fourth place to 13th even though its AUM contracted by a modest 4.1%, a far from exceptional outcome in the context of the overall ranking.

In the next tier of investors, down to 50th place, 14 out of the 25 ended the year below their starting point. Altogether 40% of the 100 companies recorded a downswing in their asset volumes. Sweden’s Corem Property Group, which was the biggest riser in 2021 following its takeover of Klövern, was down by 27% last year as it divested much of the stock it acquired from the Stockholm-listed company, including the sale of a €490 mln logistics portfolio to Blackstone. Yet most of the biggest movers were to be found outside the top 25, with private equity firms such as Greystar, Azora and Redevco all padding their portfolios, often by diversifying into alternative asset classes such as buy to rent, student living and hotel resorts.

The decision by Munich-based insurer Allianz to rebrand its real estate business as the California-based Pacific Investment Management Company (PIMCO) has tilted the balance of capital invested in Europe considerably.

Top markets
Germany remains the biggest market, but its share has been cut from a quarter to around a fifth of the total. If PIMCO (who were still operating as Allianz in 2022) and the three Luxembourg-registered investors are added in, the German market share is still over 25%, but this will no longer be the case in 2023. The US, with PIMCO, replaces the UK as the third-biggest source of capital, behind France, with Switzerland maintaining a 9% share in fifth place.

The top five countries consolidated their dominance of European real estate, accounting for 75% of the total AUM. And even though the German domestic market stalled, with Savills recording the lowest deal volumes for nine years, only three of the 15 German investors in our ranking recorded a drop in their AUM, while a majority of French, American and Swedish investors declined.

Currency devaluations
The Swedish figures were affected by an 8.4% fall in the value of the krona against the euro, a trend also seen in Norway and, to a lesser extent, the UK, where the pound dropped 5.6% over the course of 2022. Heimstaden Bostad put some of the properties it acquired in its takeover of Akelius in 2021 into joint ventures, but still managed to increase its AUM with acquisitions in Edinburgh, Warsaw and the Netherlands. Norges Bank’s real estate portfolio actually grew when measured in krone but was 5.8% down when converted to euro. Those three currencies make up around 20% of the total AUM in our ranking, although the effect has to be weighed against the gains made by the US dollar and the Swiss franc, which make up 23% of the ranking.

AUM values do not yet fully reflect the decline in asset prices that has rippled through the market since central banks began hiking interest rates in the second half of the year. Major investors have struggled to offload big-ticket assets because of a shortage of buyers or large bid-ask spreads, such as Blackstone’s efforts to sell the Tripolis office building in Amsterdam.

But some large office transactions went through, including Google’s acquisition of the Warsaw Hub for €583 mln in March, and Deka’s €566 mln sale-and-leaseback of Booking.com’s new headquarters in Amsterdam. Despite fears that the shift to homeworking would trigger a slump, a breakdown of the AUM figures for 85 companies in our survey shows the share of the total invested in offices went up from 32% to 35% in 2022. Residential assets, meanwhile, are back at their 2020 level of 21% after surging to 26% last year.

Retail and logistics
The retail sector held steady at 15%, again defying predictions that online retail would kill the shopping mall. This was the sector where repricing was most keenly felt – abrdn sold County Mall in Crawley, West Sussex at the third attempt for a sum believed to be below the asking price of £35 mln (€41.5 mln), having bought it for £190 mln in 2004. Long-term divestment plans by giants Unibail-Rodamco-Westfield and Klépierre created opportunities for new players such as Norwegian shopping centre specialist Aurora.

Logistics continued to hold up and accounted for 16% of the total, double the proportion of two years ago. Here again, sellers had to accept lower prices, notably Crossbay, which put a portfolio of 128 properties across seven countries up for sale for a rumoured €2 bn but eventually had to settle for €1.585 bn. Outside the main asset classes, student housing was a notably active sector, with Greystar joining forces with Singapore’s GIC to buy the UK’s third largest accommodation provider, Student Roost, for €3.9 bn – a deal which helped to propel Greystar from 83rd to 55th place in our AUM ranking.

The full Top100 ranking + profiles appear in the September/October issue of PropertyEU Magazine