In this report, we apply our new factor investing approach to close to 40 European office markets for the first time. This framework quantifies factors such as Volatility, Liquidity, Quality, Value, Yield and Growth. A comparison of our factor investing results to the traditional “core” and “value-add” investment styles is also provided.
Most cross-asset institutional investors are organised across three main departments: fixed income (or credit), equities and alternatives. Commercial real estate is typically represented in all three departments. Despite having different terminology and perspectives, investors increasingly look across departments to benefit from each other’s views on fundamental trends in the underlying credit, equity, collateral and property markets.
In absolute terms, European real estate has appeared expensive for the last year, as indicated by record low yields across all four property types.
Over the last few years, institutional investors have increased their exposure to non-traditional or alternative property types, which represented 14% of total direct real estate investment volumes in Europe in the first half of 2018.
French institutions have a low exposure to their residential sector in comparison to German and Dutch investors in their domestic markets. This offers the opportunity for an increase in residential investments in France given the size of the market.