Report | Intelligent Investment
European Investor Intentions Survey 2023
January 16, 2023 8 Minute Read
2023 European Investor Intentions: Opportunities remain amid challenging market conditions
- More than half of investors expect purchasing and selling activity to either increase from 2022 or remain the same, signaling a degree of optimism
- Repricing of assets is a key issue in the current investment market, presenting both a challenge and opportunity for investors
- The UK came in ahead of Germany in terms of total property returns expectations. Southern Europe also had a strong showing, with several European cities among the ten markets expecting to see the most interest in 2023
- Opportunistic, distressed and value-add assets are especially sought-after as firms look to capitalize on pricing discounts
- ESG compliance remains top of mind for European investors, despite the more challenging investment landscape. The upgrade of existing assets is the primary method of implementation, while some investors are willing to pay a premium of 20% or more for ESG-compliant assets
CBRE’s 2023 European Investor Intentions Survey suggests a degree of optimism despite a challenging investment landscape. Half of investors expect their purchasing and selling activity to either increase from 2022 or remain the same. Allocations to real estate are also expected to remain resilient, as approximately three-quarters of institutional investors expect their allocations to either increase or remain the same.
Figure 1: Purchasing and selling activity expectations side by side
Source: CBRE Research
Office remains the most sought-after sector, although residential continues to attract more investor interest. Among these property types, investors favor the prime office and build-to-rent sub-sectors.
Increasing interest rates and slowing economic growth have put downward pressure on pricing, with respondents expecting to see discounts across all sectors. The deepest are expected in retail and value-add office assets, while multifamily and Grade A offices are likely to prove the most resilient. Investors indicate to having adjusted their strategies accordingly and are heavily targeting opportunistic and distressed assets in 2023 as opportunities may emerge.
The UK overtook Germany for the first time since 2021 as the country with the strongest expectations for total property returns. London also solidified its spot as the European market expecting to see the most interest far outstripping other cities. Southern Europe also had an especially strong showing, as Madrid took fifth while Barcelona and Lisbon tied in sixth position.
Figure 2: Markets expected to see highest cross-border* interest
Source: CBRE Research
Over 80% of investors affirmed that they would continue to apply ESG criteria to all investment decisions. The most popular ESG strategy is to upgrade existing assets to meet the standards of sustainability certifications. Additionally, one-third of investors surveyed stated that they were willing to pay a premium to acquire ESG friendly assets. More than half of those willing to pay a premium said the premium could be more than 20%.
The Bottom Line
The principal challenges cited by investors in 2023 include a mismatch in buyer and seller pricing expectations, tighter lending conditions and fears of a recession. However, our survey respondents signaled a willingness to sustain purchasing/selling activity as well as maintain or increase allocations to real estate. When putting capital to work, investors favor opportunistic and distressed strategies as they seek to capture attractive yields. These findings provide a degree of optimism for continued European real estate market activity despite the difficult economic backdrop. CBRE forecasts that 2023 European investment volume will decrease 5-10% relative to 2022 levels. However, a recovery may commence in H2 2023 as macroeconomic challenges abate.
CBRE’s 2023 European Investor Intentions Survey was conducted between 10 November 2022, and 5 December 2022. 629 Europe-based investors participated in the survey, which asked respondents a range of questions regarding their buying appetite and preferred strategies for sectors and markets in 2023.