Pension's ailing health could boost property market
In its latest research CB Richard Ellis (CBRE) claims that in order for many pension funds to make up some ground in their predicted shortfalls, they will have to up their real-estate stakes.
Without reform, by 2040 state pensions' spending in the old EU 15 will have risen to 13.6 percent of GDP from 10.4 percent in 2000.
This will present some serious challenges to fund managers, and CBRE reckons they will turn to real-estate investments to save the day.
CBRE says the most appropriate allocation to real estate within a pension fund is between 10 and 15 percent. However, current weightings in European funds average around 6.5 percent. It predicts that funds seeking to increase their property portfolios will pour at least E24 (zł.96) billion into the EU-15 real-estate market per year.
A lot of this money will be directed at commercial property, and a shortage of supply will drive prices upwards, especially in markets that have been unexploited to date, which could be good news for Polish real estate.
CBRE also predicts that owner-occupiers will sell up as prices increase, to take advantage of the strong market. Secondary sectors, such as leisure property and care homes, will benefit in particular from the growing demand.
CBRE forecasts that more pension funds moving into the commercial real-estate market will spark a major increase in indirect investment, and many countries, including Poland, would do well to prepare tax-transparent REIT-type vehicles to absorb the extra cash.
"At a time when the prevailing theme across the European investment market is lack of stock, it may seem difficult to see how an increase in demand for property could be accommodated," says Nick Axford, European head of research for CBRE.
"We are already seeing a myriad of new funds and vehicles entering the market and this growth is set to accelerate. The principal beneficiaries will be those markets and sectors that have until now have been underexploited by major investors.
"In these areas of the market we are likely to see substantial growth in investor demand and a consequent increase in property values over the medium term."
Without reform, by 2040 state pensions' spending in the old EU 15 will have risen to 13.6 percent of GDP from 10.4 percent in 2000.
This will present some serious challenges to fund managers, and CBRE reckons they will turn to real-estate investments to save the day.
CBRE says the most appropriate allocation to real estate within a pension fund is between 10 and 15 percent. However, current weightings in European funds average around 6.5 percent. It predicts that funds seeking to increase their property portfolios will pour at least E24 (zł.96) billion into the EU-15 real-estate market per year.
A lot of this money will be directed at commercial property, and a shortage of supply will drive prices upwards, especially in markets that have been unexploited to date, which could be good news for Polish real estate.
CBRE also predicts that owner-occupiers will sell up as prices increase, to take advantage of the strong market. Secondary sectors, such as leisure property and care homes, will benefit in particular from the growing demand.
CBRE forecasts that more pension funds moving into the commercial real-estate market will spark a major increase in indirect investment, and many countries, including Poland, would do well to prepare tax-transparent REIT-type vehicles to absorb the extra cash.
"At a time when the prevailing theme across the European investment market is lack of stock, it may seem difficult to see how an increase in demand for property could be accommodated," says Nick Axford, European head of research for CBRE.
"We are already seeing a myriad of new funds and vehicles entering the market and this growth is set to accelerate. The principal beneficiaries will be those markets and sectors that have until now have been underexploited by major investors.
"In these areas of the market we are likely to see substantial growth in investor demand and a consequent increase in property values over the medium term."
