By Christiane Leuschner
February 2007

When asked about their investment behaviour, institutional real estate investors in Germany, France, and Great Britain reveal that returns are the main factor when making investment decisions.

For the second time, DIFA Deutsche Immobilien Fonds AG published the study “Real Estate Investments in Europe” in autumn 2006 — compared with the previous year, clear changes have been revealed. The basis of the study is a survey that the market research institute Synovate conducted with 200 institutional real estate investors in Germany, France and Great Britain. Initiators of open and closed-end real estate funds, listed real estate companies, real estate investment trusts (REITs), project developers, pension funds and insurance companies commented on the investment climate in the respective countries as well as their goals and expectations.

One results of the 2006 survey was that real estate investors take their investment decisions strongly based on return perspectives. For 59 percent of those surveyed, returns are the top criteria — last year only 39 percent claimed returns to be their top priority. The security factor lost importance as a decision criteria compared with 2005. The previous year, 58 percent claimed real estate risk investments were “a given” — this number increased to 73 percent this year.

That goes hand-in-hand with a similarly increased share of those who attribute a growing importance of active risk management with real estate investors. 75 percent of Germans, 64 percent of French and 59 percent of British investors perceive risk management increasingly important. According to their own estimations, 87 percent of those surveyed say the risks with which they claim to “very consciously” deal with are expiring rental contracts and the rental quota (67 percent respectively). Risks can develop participants, there is still room for improvement in this area, particularly in Germany. While 59 percent of the investors surveyed evaluated the British market as very transparent, only 26 percent gave the German real estate market a (sufficiently) high transparency. They mainly complain about the lack of disclosure standards and uniform performance criteria, a deficit that is definitely a major factor when taking investment decisions for 63 percent of the investors surveyed.