New | High European prices worry big players
Excess capital chasing scarce prime stock raises concerns of a bubble
At the door of the Tristan Capital Partners party at the MIPIM real estate conference in Cannes, France, invitations to the most raucous party of the week are as scarce as the trophy properties investors are trying to buy.
Doormen scrutinise their clipboards as developers and brokers not on the guest list try to talk their way into the party. The free-flowing champagne inside is not enough to wash away concerns among the biggest players that there is a bubble building in the market for the best properties.
"It's like 2006 again, it's frightening," said Joe Valente, the head of research and strategy at JP Morgan Asset Management. "There's excess capital chasing scarce stock. The only big difference is debt, which was readily available back in 2006 and isn't as available today."
Record-low returns from fixed-income investments have spurred money managers to buy real estate in a search for yield. Institutional investors will spend a further US$52.5 billion on real estate this year, with Europe a key target as funds increase their appetite for risk, broker Colliers International forecasts.
If you're an institutional investor and you're looking to invest in core but you can't find anything, the temptation is you begin to stray. That's the surest way of losing money
"We'll not do trophy assets because they are too expensive," said Pierre Vaquier, the chief executive at Axa Real Estate.