Infrastructure, private equity and real estate combined will soon be as important an asset class as equities and bonds, according to a property company, which says these “real assets” will account for a quarter of global pension fund holdings within 10 years.
Jos Short, executive chairman and co-founder of Internos Global Investors, a 2.1 billion-euro (Dh10.03 billion) European property investment group, said there was a “tectonic” shift underway in the attitudes of institutions to property investment.
He predicted institutions would raise their real estate holdings in their overall portfolios to 10 per cent from typical levels today of 5-8 per cent.
This shift, said Short, was being led by US investors but he also noted evidence of growing interest in real estate from German institutions and predicted that UK institutions would follow suit.
Data released by Jones Lang LaSalle, a property company, on Friday showed US investors allocated a net $3.03 billion (Dh11.14 billion) to European real estate in the first nine months of 2012, up from $1.87 billion in the same period last year.
Total cross-border inflows into European real estate have surged 60 per cent to $11.2 billion so far this year from $7.0 billion in the first nine months of 2011.
Robert Stassen, head of European capital markets research at Jones Lang LaSalle, said London remained the most attractive city in the world for cross-border investment, attracting inflows of around 7 billion euros per quarter.
Short said European real estate could offer stable income streams for institutions provided they looked beyond trophy assets in fashionable city centres.
Internos, which runs eight funds offering exposure to retail, industrial and office properties, has just spent 100 million euros buying four hotels for its European hotel real estate fund. It is in the process of raising a further 50 million euros from investors after securing an initial 75 million euros from four German institutions.
Internos is also planning to launch another commercial property fund in the first quarter of 2013 aimed at institutional investors.