The prospects for real estate investment in Europe remain positive in spite of widespread geopolitical uncertainty, according to a panel of senior industry figures convened at the 2017 ULI Europe conference in Paris.

Participants argued that in spite of heightened political volatility across the globe, the environment for real estate investment in Europe, and indeed globally, remains extremely positive. The political climate is not necessarily influencing real estate as much as one might think, given the intensity of the rhetoric.

“The long-term trends for real estate are still pretty positive,” said François Trausch, chief executive of Allianz Real Estate, the real estate investment arm of German insurer Allianz. “Europe has a pretty good growth outlook for 2017—much better than a few years ago. There are geopolitical unknowns, but the long-term secular trend continues to be positive for real estate. Geopolitics is not something we can prepare for or do anything about, except as a citizen.”

Sophie van Oosterom, Europe/Middle East/Asia chief investment officer at fund manager CBRE Global Investors, focused on the opportunities presented by the current climate.

“Governments are changing, and what kind of opportunities does that actually present?” she asked. “There was a change in government in Poland, and it made us underwrite our investments differently. And from the outside it looked bad. But what has actually happened is that consumer spending is up and GDP is up, because people feel confident. In the U.K., GDP has held up after Brexit, and predictions are that it will increase in the U.S. under Trump.”

That said, van Oosterom did point out that CBRE Global Investors had sold many of its U.K. assets ahead of Brexit, and was cautious about investing there now. In general, she added, “We’ve had a lot of quantitative easing, and we could see interest rates starting to rise soon. That is what we are underwriting in our new investments. And so we are looking for assets where we can improve rents and add value through asset management even if rates rise. You won’t be pushing for 10 percent total returns, but you will get acceptable returns, given where bond rates are.”

Massimo Saletti, global cohead of real estate, gaming, and lodging at investment bank J.P. Morgan, said public markets are remaining resilient to political uncertainty. “If you look at sterling bonds, the first month of 2017 saw as much new issuance as the whole of 2016 combined. There is plenty of capital out there looking for a home. If you look around the world, Europe doesn’t look any more unstable politically than other regions.

“You wouldn’t launch an initial public offering the day after or the day before the election in the Netherlands, France, or Germany, but for the right story, like logistics or residential where there isn’t already a big listed market, like Germany, there is a lot of interest.”

Some asset classes are profiting from or remaining more resilient in the face of political uncertainty, said Nathalie Palladitcheff, executive vice president and chief finance officer at Ivanhoe Cambridge, the real estate investment arm of Canadian pension fund Caisse de dépôt et placement du Québec.

“Although there is a lot of uncertainty, one asset class that has been insulated from this is rented residential,” she said. “In the U.S. and U.K., we have gone from $1 billion of residential to $10 billion in the past couple of years. It is a sector that is fighting uncertainty. When the environment is uncertain, people prefer to rent rather than buy, so it is a good hedge. If you choose the right cities, they won’t be affected by the election of Trump. The fundamentals of demographics are going to remain, whatever Trump’s policies. We’re very bullish on the U.S.”

Palladitcheff’s point picked up on the fact that an earlier session at the conference had outlined the demographic changes that would have a huge impact on the global economy. Among the highlights of the presentation by Sarah Harper, professor of gerontology at Oxford University:

  • People over age 85 constitute the fastest-growing portion of the population in advanced and some emerging economies.
  • In advanced economies, more than half of the people born in 2007 will live past age 100.
  • By 2050, there will be more than 8 million people 100 years old or older in the United Kingdom alone, and 124 million in Europe.

This provides opportunities for real estate, but it has not quite realized how to capitalize on them, panelists argued.

“If we all live to 150, then we are going to need more savings. They have to come from somewhere, and real estate is a good way to get that,” Trausch said.

But the conference delegates heard that institutional investors in Europe in particular had not yet worked out how to grasp the most obvious opportunity from this—an increase in the need for retirement housing and health care facilities targeting end-of-life care.

“It is not a mature sector here yet,” Palladitcheff said. “In the U.S., it is easier because you just have one regulatory system and all the provision is private, so there is huge demand. In Europe, you have different regulations in different countries, and the public and private side are closely linked, so it is very hard for us to know the rules of the game.”

Panelist debated the prospects for Asian investment in Europe, which is expected to continue, but not necessarily in a linear fashion.

“If you believe in the fact Asian economies will continue to grow and come to define the world economy over the next 30 years, then you have to believe that trend will continue, and capital will continue to systematically come out of Asia,” Trausch said. “There are investment managers bringing that capital out, and just as we did 20 years ago, Asian investors are going through a process by which they are becoming more sophisticated.”

This is taking place in different ways, van Oosterom added. “You have sophisticated investors working with investment managers on a discretionary and nondiscretionary basis,” she said. “Then you have Korean investors, who have been almost more like brokers, tying a deal down then looking to syndicate the equity, often even bidding against themselves. They have been successful in securing some deals in this way. What we haven’t seen is investors going into funds.”