Across most real estate sectors the US has been the dominant market for what seems like forever, but in some areas this is changing.
According to a new investor intentions survey carried out by McKinsey, things are looking much rosier for Europe than they were a couple of years ago. In fact the continent is now more attractive than North America when it comes to hospitality.
"When we did the survey of intentions and enthusiasm for different geography and asset combinations two years ago, we found that the US was really dominant across pretty much every sector [...] that's very different today, where we've seen a relative rise in the interest in Europe as people have had less enthusiasm on a relative basis for either the US or APAC. And when we look now where Europe stands, it's really very comparable to the US in terms of the resi and industrial space and in hospitality, Europe is the globally preferred destination for capital,” said Ben Dimson, partner at McKinsey & Company during a panel discussion at MIPIM.
Europe’s resurgence as a destination for international capital, especially in the hotel sector is something we’ve been tracking over the past year. The reasons for its renewed popularity are likely a mix of the structural and the geopolitical.
Supply in many key cities and destinations remains constrained, tie that in with robust internal and external demand and you have a potent cocktail of long-term opportunities. Then there is unpredictability of the Trump administration as well as war in the Middle East.
The panel included participants from a number of global firms and although many were bullish on the investment potential, they did flag a couple of issues.
"Europe's not easy to invest in. It's very fragmented. You don't necessarily have all sectors working in every jurisdiction," said Richard Varkey, managing director and head of real estate at the Investment Management Corporation of Ontario.
Others agreed. “Likewise for us, we are increasingly focusing on Europe,” said Mark Lee, head of real estate at the Australian Retirement Trust.
Lee added that as an Australian investor this was all part of the firm’s diversification strategy.