Investments in indirect real estate continue to grow

29/01/2008 15:00

By the end of 2006, Dutch institutional investors had invested 124.3 billion euro in real estate; 48 percent was invested in shares of real estate investment companies. This type of investment is termed indirect real estate. In 1980, only 3 percent of total investment in real estate was indirect real estate.

Real estate investments made by institutional investors

Real estate investments made by institutional investors

There are two obvious reasons for the shift from direct to indirect real estate. The first reason is that the average institutional investor currently requires a larger direct real estate portfolio to make profit than one or two decades ago. A number of institutional investors indeed considered their portfolios as too small to be profitable and have sold them to real estate investment companies in exchange for shares.

The second reason is that institutional investors realise that proper knowledge of real estate market conditions is becoming increasingly valuable. Currently, management of foreign direct real estate is outsourced to institutions familiar with the local situation. Since 1995, pension funds have sold a large chunk of their direct foreign real estate to real estate investment companies.

John Gebraad