Health and life science sectors continue to attract investors, according to CBRE report

The UK has retained its status as the top European cross-border investment destination, according to CBRE’s 2024 European Investor Intentions Survey.

The survey shows that European investors have the highest return expectations for the UK for the second consecutive year, followed by Germany and then Poland.

Spain and the Netherlands completed the top five European investment destinations.

And, while student accommodation and senior living continue to be the most-popular alternative asset types, interest is also increasing for data centres, life sciences, and healthcare-related assets, according to the research.

The report states that, despite ongoing inflationary pressures, the UK is in a stronger position than in 2023 and investment is forecasted to recover in concurrence with a fall in interest rates.

Indeed, London is once again the most-attractive city for cross-border investment, followed by Paris, Madrid, Amsterdam, and Berlin.

In Germany, investors now have a strong opportunity to enter the historically-strongest investment market as pricing levels approach their bottoms after a tumultuous 2023.

Chris Brett, managing director of capital markets Europe at CBRE, said: “London is one of those few cities which consistently demonstrates its resilience in the face of challenging economic headwinds and remains a major focal point for global capital.

Promising returns

“That being said, smaller markets, such as Poland, are emerging as strong investment targets with promising return profiles, as well as a resurgence of interest in the Southern European markets.

“Spain and Italy have both made strides to futureproof their economies with investment into green energy and digitalisation, making them attractive options for forward-thinking investors.”

Survey responses indicate that momentum is starting to pick up in the European real estate investment market, with a notable uptick in sentiment.

Buying and selling expectations are higher in 2024 than in 2023 and over half of the investors surveyed believe that market activity will return to levels seen before the rise in global interest rates by the first half of 2025.

In terms of real estate, 80% of investors expect allocations to the sector to remain the same or increase in 2024, with over 60% of investors demonstrating a preference for value-add, opportunistic, or distressed asset strategies in 2024, the most since 2021.

However, the tight lending conditions remain a major challenge for investment.

Half of respondents stated that the widespread fall in capital values presents a challenge to refinancing, while the increased costs of servicing debt and lower Loan to Value (LTV) ratios are viewed as major impediments to investment by approximately three quarters of respondents.

Sustainable strategies

Two thirds of survey respondents are planning to pursue alternative investment in 2024, with interest increasing for data centres, life sciences and healthcare-related assets.

But sustainability strategies have come under increasing pressure in a capital-constrained environment and investors have had to adjust accordingly to maintain long-term profitability.

And approximately 80% of investors who expressed a willingness to implement sustainability strategies indicated they seek to retrofit existing buildings.

“It is clear from our survey that repricing expectations have stabilised compared with last year,” said Raphael Rietema, director of capital markets research at CBRE.

“While investors believe that downward pressure on pricing will continue in the near term, the results indicate that in some sectors price floors have begun to form.

“We are expecting investor appetite for real estate to pick up in the second half of the year, with riskier strategies prevailing as investors try to capitalize on market dislocation.

“Access to debt costs remain prohibitive, but this should begin to ease when interest rates start to fall, providing a further catalyst for the market.”