Results from the 2014 KPMG’s Real Estate Invest Survey (RE-Invest Survey) show that the global real estate market will see a resurgence of deal activity over the next 12 months. A bullish attitude is back as investors target opportunistic assets to maximise their returns.

The RE-Invest Survey shows that 81 per cent of investors questioned said Western Europe offered the best investment opportunities at the time the report was written with Southern European countries like Spain, Italy, Portugal and Ireland predicted as the new hot spots come 2015. Also, 42 per cent said they would adopt an opportunistic strategy and target distressed or undervalued assets.

 “Stronger economic stability, better debt availability and an improving capital market have created the ideal conditions for investors to regain their confidence in the real estate market and make bold decisions to secure better returns,” said Stefan Pfister, European Head of Real Estate at KPMG. “Many are already adopting more opportunistic investment strategies, hunting out undervalued or distressed assets in order to capitalise on them as the market undergoes a revival.”

“As the economy picks up global investors will become bolder and look further afield for the best opportunities,” said Richard White, KPMG’s UK Head of Real Estate. “Some investors feel increasingly priced out of the core markets, like the UK, and they recognise there may be a better chance of getting access to the right opportunities in the strengthening markets of Southern Europe.”

On a less positive note, it’s noted in the survey that a funding gap could emerge if traditional debt providers remain reluctant to fund perceived riskier transactions. Whilst overall debt conditions are stabilising, lack of availability to support a sudden surge in transaction levels could constrain future market activity. Uncertainty, with regards to future availability of debt, is apparent with respondents split as to whether debt availability for European real estate investments will contract further during 2014 and 2015.  

“Investors are concerned that a sudden uptake in activity could leave a shortfall in the debt available to fund these transactions,” said Richard.  “Traditional lenders in the UK remain reluctant to finance deals in locations which are perceived to be higher risk, so there could be a mismatch of demand and supply of debt as investor appetite for Southern Europe grows.”