The European listed real estate sector has the potential to double in size over the next five years, as banks look to offload distressed property assets held on their books and private investors turn to attractive REIT structures to realise the value of their investments.
In the UK, Europe’s deepest and most liquid listed property market, banks are slowly beginning to shift property assets held against distressed loans from their books, and
the country’s REIT investment vehicle offers an efficient means of exiting these
In Spain and Ireland, which have both experienced deep shocks to their financial systems through highly leveraged speculative property investments, the utilisation of listed vehicles to help the market clearing mechanism shift distressed real estate stock into the more robust and transparent listed real estate sector is probably still some way off, but is likely to come into play in the future.
Italy’s government is sitting on extensive property holdings, which could be used to help reduce its large fiscal deficit, but EPRA believes that shortfalls in the Italian REIT structure are limiting the efficient use of the equities market.
On Europe’s periphery, Turkey is perhaps a surprising candidate for lifting the continent’s listed real estate market capitalisation, but it has a robust REIT regime, which includes residential property – in contrast to Germany, for example, and a dynamic strongly growing economy with a young active population.
“The value of Europe’s investable property stock is the largest in the world at around $9.0 trillion, but only a tiny fraction of that is held by listed real estate companies,” said Hughes. “We are on the cusp of a period of unique opportunities over the next few years to substantially increase the European quoted property sector to the benefit of investors, governments, and private companies alike.”