The investment climate index from the first half of 2020 shows that it is not only private investors who are struggling with the COVID-19 pandemic. Instead, the virus also has an immense impact on the investment strategy of institutional investors.
The market research institute Ipsos collects the investment climate index for Union Investment every six months. 150 institutional investors in Germany, France and Great Britain were surveyed from May to July this year – the results published in mid-August show how decisive the influence of COVID-19 is on the investment behavior of institutional investors.
“Less risk, lower return”
“Less risk, lower return” – that is probably the new motto of the experts from Germany, France and Great Britain: According to the study on the Investment Climate Index, 58 percent of those surveyed currently think this approach is correct, in Great Britain it is as much as 79 percent. For comparison: Before the pandemic, it was only a total of 53 percent of those surveyed.
According to Union Investment, however, only around five percent of the experts surveyed consider it an option to temporarily not invest in real estate at all and thus sit out the current situation.
Safe investments: These asset classes will benefit
In order to avoid risks, institutional investors will at least briefly shift their areas of interest – this can be seen from the study results. 55 percent of the experts questioned expect increasing inflows in the residential asset class and a full 65 percent also expect increased investment interest in the areas of health care and logistics.
Olaf Janßen, head of the real estate research department at Union Investment, is quoted in a Union Investment press release: “Both types of use [Health Care und Logistik] are not very susceptible to crises and help to stabilize the cash flow in a portfolio. “
In addition, 49 percent of those surveyed stated that they would increasingly want to invest in core real estate and around 42 percent plan to invest more in their own country for security reasons.
Sustainable real estate is on the rise – hotels are losing institutional investors
Another beneficiary of the shift in interests of institutional investors is the asset class sustainable real estate. A switch in the industry seems to have flipped with the pandemic, because in this year’s survey 31 percent of investors from Great Britain, 56 percent of German investors and a full 71 percent of French investors said they want to invest more in sustainable real estate – the median is 54 percent.
However, there are also loser asset classes: Only a few experts expect an increased inflow of capital after the pandemic in retail (13 percent) and the hotel industry (15 percent). In the second half of 2019, things looked very different – at that time, just under 40 percent of those surveyed expected an increasing transaction volume in the hotel asset class.
Germany as “anchor of stability” in the investment climate index
By the way: Union Investment describes Germany as a “stability anchor” in the press release on the Investment Climate Index. Compared to the previous half of H2 2019, Germany only lost 0.6 percentage points, while France and Great Britain, which were previously significantly higher in the index, are currently less than 60 points.
“Germany benefits from its economic strength and the government’s good crisis management so far. Like the other German locations, Berlin and Frankfurt have a manageable pipeline of office space and thus a good chance of quickly leaving the crisis behind, ”said Janßen in the Union Investment press release.
It remains to be seen whether the shift in interests and thus the change in the investment strategy of institutional investors in Germany is long-term or short-term.
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