When I speak with investors and capital markets brokers I receive a similar story: in the weak economic environment across Europe real estate investors are focusing on prime core property in the major markets. When I analyse the direct investment transactions in H1 2010 I get a different result: in many countries half of the investment transactions were completed in secondary locations outside the major cities. In the UK more than half of all investments (by value and particularly by number) were outside London in H1 2010. In Germany about 60% of all investments happened outside the so-called Big 7 cities.  Some might argue that not all investment outside the major markets is really “secondary”. They are right, not all property there is of secondary quality or offers shorter leases. However, the major international investors will tell you that they don’t buy in these locations.

We are not talking about a few million Euro, we are talking about billions invested in these locations in the last 6 months: in the UK about EUR 8bn, in Germany about EUR 5bn and in France more than EUR 2bn. How could market perception and reality differ so much? One reason is that there are completely different investor groups active in these markets. This is at least partly true. Privates, family offices and some private equity funds are very active in secondary locations looking for higher yielding secure income assets in markets with lower volatility. Nevertheless, also huge listed companies and REITS, major funds and insurance companies have undertaken some considerable investments in recent months.

The focus on core investments in the major, prime markets may be nothing more than a nice story for the press, shareholders and banks to give the impression that the invested money is safe and at low risk. …and then even the big investors leave the major city boundaries and buy into real opportunities.