AEW Plans $5 Billion European Property Spending SpreeDalia Fahmy
AEW Europe plans to buy as much as 4 billion euros ($5 billion) of European real estate in the next three years as demand from Asian investors spreads across the region.
“Asian flows of capital have been rising fairly significantly,” Rob Wilkinson, chief executive officer of the Paris-based investment company, said in an interview. “What we’ve seen so far is just the tip of the iceberg.”
AEW Europe manages about 18 billion euros of real estate in Europe for investors including Asian pension funds and insurers. The company plans to double its U.K. and German assets under management within two years, Wilkinson said.
Asian funds bought a record $14.6 billion of European properties in 2013, according to data compiled by Jones Lang LaSalle Inc., as they hunted for returns amid record-low interest rates. This year, investments will probably exceed $12 billion, David Green-Morgan, Global Capital Markets Director at Jones Lang, said by e-mail.
Europe’s slow economic recovery has failed to deter Asian investors. The euro area economy will grow 1.3 percent next year, slower than the 1.5 percent pace predicted in July, after a 0.8 percent gain this year, the International Monetary Fund said on Oct. 7.
“Countries, cities and various sub-markets never behave in the same way, despite what the economic forecasters say,” said Wilkinson. “There are always opportunities if you know where to look.”
AEW Europe’s properties include the PB6 office tower in Paris’s La Defense district and The Bridges shopping mall in the English city of Sunderland. AEW Europe’s Boston-based sister company, AEW Capital Management LP, manages 19 billion euros in Asia and North America.
AEW Europe’s clients, which include pension funds and insurers from Asia, North America and Europe, are seeking reasonably priced properties in the U.K.’s increasingly expensive market, and reliable rental income in Germany, said Wilkinson. The firm hopes to reduce risk by buying properties away from the spotlight.
“It’s always a concern when a wall of money is chasing a certain type of asset,” said Wilkinson. “We tend to avoid highly competitive situations and advise our clients” to do the same, he said.
In the U.K., AEW Europe is investing in buildings costing less than 5 million euros because they don’t attract the interest of many large investors and are therefore cheaper, said Wilkinson.
While a weak French economy is deterring some property investors, the market is still attractive because it’s liquid, transparent and stable compared to others in Europe, Wilkinson said.
In Germany, industrial and retail properties are particularly attractive as investors seek to take advantage of steady growth in Europe’s largest economy, despite lowered forecasts for growth.
“We like the industrial powerhouse that Germany is, and its location in the heart of Europe,” he said. Shopping centers in small, affluent towns offer particularly good returns, he said.