REITs in Europe: History, Development, and Future

STRASBOURG, FRANCE - JUNE 23, 2018: All EU Flags European Union flag waving in front of European Parliament, headquarter of the European Commission European Parliament

Real Estate Investment Trusts (REIT) have become a popular means of investing in real estate in many parts of the world. Although the first REITs were created in the United States, the concept has expanded to Europe and other parts of the world. In this blog, we will explore the history, current success, and future of REITs in Europe.

History and the First REITs in Europe

REITs were first established in the United States in the 1960s as a way to make real estate investing accessible to a broad range of investors. This model later inspired similar investment structures around the world, including Europe.

The first REIT in Europe, known as “Fonciere des Regions“, was founded in France in 1968. This step laid the foundation for the development of REITs in Europe, although their popularity grew gradually over the ensuing decades. The UK later introduced real estate investment funds (REITs) in 2007, which had a significant impact on the European market.

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Some of the largest REITs in Europe, measured by market capitalization and the extent of their investments, can change over time. However, as of September 2021, several prominent European REITs included:

Unibail-Rodamco-Westfield (URW): This REIT specializes in commercial real estate and manages several large shopping centers in Europe. With a broad range of assets across the continent, URW is one of Europe’s largest REITs.

Klepierre: This REIT also focuses on commercial real estate and specializes in shopping centers. Klepierre has a presence throughout Europe and is considered one of the leading REITs in its category.

Gecina: Gecina is a French REIT that deals with residential and business real estate, with a particular focus on Paris and its suburbs. It’s one of the largest residential real estate REITs in France.

SEGRO: This REIT specializes in industrial real estate and logistics. They have a portfolio throughout Europe, including the UK, Germany, Spain, and other countries.

Covivio (formerly Fonciere des Regions): This French REIT deals with various types of real estate, including commercial, residential, and hotel properties. They have a portfolio that extends beyond France and includes properties throughout Europe.

Deutsche Wohnen: This German REIT specializes in residential real estate and owns and manages a large number of residential units in Germany.

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Success of REITs in Europe

Over the years, REITs have proven to be a successful model for real estate investment in Europe for several reasons:

Portfolio Diversification: REITs allow investors to diversify their portfolio by investing in different types of real estate, including residential, commercial, industrial, and hotel properties. This reduces risk and ensures stability.

Access to high-quality properties: Investing in real estate can be capital-intensive. REITs provide access to high-quality properties without the need for direct ownership or management.

Liquidity: REITs are typically traded on stock exchanges, allowing investors to easily buy or sell shares, ensuring a high level of liquidity.

Regular returns: Most REITs are required to distribute the majority of their income to investors in the form of dividends. This makes REITs attractive for those seeking regular income.

Tax benefits: REITs in many European countries enjoy certain tax benefits, attracting investors.

Professional management: Most REITs are managed by professional teams with expertise in real estate, ensuring efficient management and optimization of the portfolio’s value.

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Development of REITs in Europe

Following their initial steps, REITs have expanded across Europe. Although initially concentrated in a few countries, REITs now exist in many European countries today. The British REIT model, in particular, has been a template for many nations.

European REITs are also evolving in terms of asset diversity. While commercial real estate remains dominant, there is increasing investment in other sectors such as residential properties, industrial buildings, hotels, and other property types.

Some of Europe’s largest cities, like London, Paris, Frankfurt, and Madrid, have become key markets for real estate investments through REITs.

Future Outlook for REITs in Europe

The future of REITs in Europe looks bright and promising. Several key factors are likely to contribute to the further development and growth of this market:

Demand growth for properties: The demand for residential, commercial, and industrial properties in Europe continues to be strong. Urbanization, demographic shifts, and economic stability contribute to this demand.

Environmental aspect: Green and sustainable projects are becoming increasingly significant in the real estate sector. Investors are increasingly seeking sustainable REITs, and laws and regulations support environmentally responsible business.

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Technological innovations: Technology plays a crucial role in enhancing property management and user interaction. REITs that embrace innovation can achieve competitive advantages.

Growth of tourism: Given the growth of the tourism industry in Europe, hotels and tourist destinations are becoming attractive investments. REITs investing in this sector can anticipate revenue growth.

Digitalization: The rise in online commerce and digitalization may lead to changes in the needs for commercial properties. REITs will have to adapt to these changes.

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Through continuous adaptation and innovation, REITs are likely to continue attracting investors in Europe. Their ability to provide access to high-quality properties and stable returns makes them an attractive asset for portfolio diversification. With an increasing focus on sustainability and technological innovations, REITs are poised to adapt to challenges and achieve successful growth in the future.