According to the firm’s 2023 real estate survey, German institutions want to more than double their portfolio allocation to North America and Asia and are prepared to reduce allocations to the German market by 12 percentage points to 57%.

Speaking at Expo Real, Axel Vespermann, head of real estate at Universal Investment, said: ‘The shift in focus towards the Asian market isn’t a brand new story, so it doesn’t really come as a surprise. Many investors have been pivoting towards Asia in recent years; and they have been active in the US for ages. They aren’t always investing outside Europe in a direct manner, as not all have the funds to do that, so a lot is still indirect.

‘Yet since the rise in interest rates, many investors have been reminded of the importance of holding a well-diversified portfolio.’

He added: ‘Another welcome finding from our survey is the fact that investors have confirmed their intention to maintain current allocations to real estate. There has been a bit of nervousness in the industry, with fixed income products drawing attention since the interest rate changes. Yet we see that investors believe that a well-balanced real estate portfolio provides a better return overall.’

Turning to the mood at Expo, Vespermann said: ‘There’s a very concentrated mood at Expo. The biggest takeaway is that it’s not a time for small talk – it’s time to find solutions to continue doing business. The current macroeconomic climate has divided the investment community into two divisions: those with low or no leverage are actually seeing extra performance from their assets due to the indexation of lease agreements. Those that are geared a lot, are having difficulties coping with high interest rates. We believe we will see more market participants struggling with high interest rates, especially those with 60-70% gearing.’

He added: ‘In terms of the market’s structural trends, nothing has really changed. Office and retail assets are still under pressure, albeit to a lesser extent than before. Most of the investors surveyed will continue to invest in offices. They intend to put their remaining munition into new asset classes, such as data centres, senior living, and residential which is still extremely popular.

‘The German residential market is of particular interest, with development pipelines halted, construction costs high, and political pressure to keep rents down. All that gives a strong advantage to existing residential real estate. It is probably the asset class that will get back to normality the soonest, we are seeing the first deals happening there.

‘We expect to see a broadly diversified picture in 2024 without a doubt, with fresh ideas and new business to be initiated following a value correction. There are a lot of new fund initiators that are not burdened by old portfolios and ready to start from scratch.’