The eager masses thronging the iconic shopping district of London’s West End prove that for institutional investors in commercial real estate, there is safety in numbers. The clothes the customers are buying will go in and out of fashion, but the streets where they purchase them, including the hallowed names of Oxford, Regent and Bond (Old and New), will not.
The plush offices of nearby Mayfair, many of them occupied by hedge funds, are no less attractive to investors looking for real estate safe havens — those properties deemed likely to produce a steady income stream in the years ahead because their prime locations shelter them from the vagaries of the global economy.
Within Europe “there’s been a flow of capital from markets seen as volatile to safe havens,” says Joe Valente, European head of research and strategy for global real assets at J.P. Morgan Asset Management in London. “It is manifest in the stream of money going into the U.K., Germany and France,” he says. Since the 2008 collapse of Lehman Brothers Holdings triggered the global economic downturn, these three countries have accounted for about 70 percent of the $100 billion or so a year of European commercial real estate purchases made by investors, well above the long-term average of about 50 percent, Valente says.
This increasing concentration of investment in prime markets is taking place on the national level, too. “Investors are not just moving into safe havens in terms of countries. They’re also moving into safe havens within countries,” says Valente. He estimates that Germany’s top three markets — Berlin, Frankfurt and Munich — have attracted about 65 percent of all investment activity in the country since the Lehman collapse, up from a more typical proportion of about 50 percent. “This has left behind markets such as Hamburg, which in normal market conditions attract a lot of institutional money,” says Valente.....