European listed real estate could double in five years — EPRA

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.

Fraser Hughes, head of Research at the European Public Real Estate Association (EPRA) said converging opportunities are converging could double the €300bn market capitalisation of the European listed real estate sector over the next five years under a best-case scenario.

He was speaking at the REALTY 2011 annual real estate trade fair in Brussels
during a seminar on European Real Estate Investment Trusts (REITs).

Europe’s three largest economies: Germany, France and the UK, have the greatest potential to increase the size of their domestic listed real estate sectors by between €10bn to €50bn each, but there also interesting situations emerging in Italy, Turkey, Spain and Ireland.

In Germany, the liquidity crisis in the €88bn open-ended property fund sector which has locked-up investors’ capital in the vehicles, is likely to increase pressure for the expansion of a more liquid and transparent listed real estate sector, particularly by institutional investors.

Of the 10 largest global property markets (with the exception of Italy at 0.6%), Germany has the lowest proportion of its underlying real estate held within the listed sector at only 1.5%.

In France, Europe’s largest quoted property sector by market cap, expansion could be driven by more private companies floating their portfolio via the tax efficient SIIC (REIT) structure.

But Hughes added the French industry needed to do more to boost liquidity to attract investors, as the limited free float in real estate shares meant that of the 80 quoted property companies in France, only 10 are included in the FTSE EPRA/NAREIT European real estate shares index.

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