The Changing Location Dynamics of Real Estate Investing

"Traditionally headline institutional grade real estate investment activity in Europe has focused on established financial centers. This was not surprising given the needs of investors for competitive returns, secure income streams and liquidity. However, over the last decade the fundamental characteristics of non-residential real estate investment markets in Europe have undergone significant changes. On the back of unparallel growth in investment volumes, the composition of investment activities has shifted from domestic towards cross-border, encompassing a greatly expanded range of actors and menu of product choices. Given the magnitude of structural changes which have taken place in investment markets this paper examines the extent to which these have been translated into changes in the location dynamics of real estate investing in Europe through an investigation of the extent to which secondary European locations have benefited from increased real estate investment flows in this period At the outset there are strong a priori reasons to suggest that recent real estate capital flows in Europe have been spread over a wider range of investment locations. These include the greater diversity of players, especially on the indirect side, a more focused approach to the construction of cross-border investment strategies based on the pursuit of return opportunities and diversification potential, and in general significantly better product and performance information for a wider range of locations. The fact that very few established centers have experienced significant levels of oversupply despite record investment volumes as compared to the mid-nineties suggest that capital has been spread over a wider range of locations. The task of this paper is to explore this hypothesis and within it to identify the magnitude of any flows involved and to explore the characteristics of both the recipient locations and the investment market actors involved. The paper concludes by assessing the implications for the competitiveness of the locations involved and at a more general level for the structure of European real estate investment markets.""