A European climate index for real estate investment
Since 2005, Union Investment has been systematically tracking the sentiment and expectations of property investors in Germany, France and the UK. The real estate investment climate index delivers regular insights into attitudes and changes in the three largest European economies, while also providing information on future transaction trends. 2014 saw the addition of a special index for the hotel market, the Hotel Investment Barometer.
Establishing how the European property markets tick is a challenge. Collating and comparing opinions and expectations – and translating that information into substantive findings – is an even bigger challenge. “Union Investment's real estate investment climate index does just that. For 12 years now, it has been tracking investor sentiment in the three largest European economies,” explains Olaf Janßen, head of real estate research at Union Investment. The index provides answers to key questions around the investment climate in the European real estate markets. This includes how European investment professionals rate the environment for investment projects. It is also possible to predict likely transaction trends, while the separate national indexes allow useful comparisons between the three countries.
The property investment climate index was launched in 2005. To mark the company’s 40th anniversary, Union Investment Real Estate (at that time still known as DIFA), commissioned market research as part of a wider study of investment culture undertaken by the Union Investment Group. It soon became apparent that the new climate index represented a milestone in property research. The independent survey, which is commissioned and published by Union Investment Real Estate at regular intervals, is carried out by market research institute Ipsos. Computer-based and telephone interviews are conducted with 150–200 decision makers from real estate companies and institutional real estate investors in Germany, France and the UK. The survey initially took place once a year, but has been conducted twice a year since 2008, in spring and autumn. The results of the interviews are consolidated into four indicators, each of which has a weighting of 25 per cent in the index: market structure, general environment, location factors, and expectations. Used by property researchers and real estate asset managers for strategic analysis and forecasts, this unique database grows year by year.
“Over time in particular, the climate index reveals what impact changing conditions such as the international financial and credit crisis or historically low interest rates have had on sentiment among European real estate investors,” says Olaf Janßen. The findings also provide clear indications of factors such as investment criteria, buying and selling intentions, risk appetite, investment opportunities and current property trends. “Being able to compare the individual countries is particularly interesting,” adds Janßen. Union Investment Real Estate also regularly includes other topical issues in the survey, such as investors’ risk appetite and strategies for dealing with a low interest rate Environment.
In addition, since 2014 the Hotel Investment Barometer has provided specific trend analyses on the international hotel investment market. Union Investment Real Estate is co-founder of this industry barometer in association with trade journal hospitalityInside. The underlying survey of hotel experts takes place twice a year.