Why consider European real estate?

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Disclosures

This marketing communication is intended only for Professional Clients in Continental Europe (as defined in the important information), Dubai, Guernsey, Jersey, Ireland, Isle of Man and the UK; for Sophisticated or Professional Investors in Australia; for Institutional Investors in the United States; for Institutional Investors and/or Accredited Investors in Singapore; for Qualified Clients/Sophisticated Investors in Israel; for Professional Investors in Hong Kong; for Qualified Institutional Investors in Japan; for certain specific Qualified Institutions and/or Sophisticated Investors only in Taiwan; for Wholesale Investors (as defined in the Financial Markets Conduct Act) in New Zealand, for Qualified Professional Investors in the Republic of Korea; for certain specific sovereign wealth funds and/or Qualified Domestic Institutional Investors approved by local regulators only in the People’s Republic of China; for Qualified Institutional Investors and/or certain specific Institutional Investors in Thailand; for certain specific institutional investors in Brunei and Indonesia, for Qualified Buyers in the Philippines for informational purposes only; for certain specific institutional investors in Malaysia upon request. In Canada this document is for use by investors who are (i) Accredited Investors and (ii) Permitted Clients, as defined under National Instrument 45 106 and National Instrument 31 103, respectively. It is not intended for and should not be distributed to, or relied upon, by the public or retail investors. Please do not redistribute.

Investment risks

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Property and land can be illiquid and difficult to sell, so the fund may not be able to sell such investments when desired and at the intended price.  The value of property is generally a matter of an independent valuer’s opinion and may not be realised.

Why European Real Estate?

Speaker:

Property is a key pillar in a well-constructed multi-asset portfolio.

It offers a valuable combination of income stability and long-term growth potential.

At the same time, it has a low correlation with equities and bonds, which helps balance overall portfolio risk.

On screen graphic image at 0:24:

A circular diagram titled “Multi-asset portfolio”. Around the circle are six categories: Public fixed income, Cash, Real assets, Private credit, Private equity, and Public equities.

Text featured below the graphic image: (1) Invesco Real Estate using data from MSCI as of June 30, 2025. (2) MSCI, Bloomberg and FTSE EPRA/NAREIT Index as of September 30, 2025. Correlations were calculated using the longest available common time period from 1Q 2008 through 3Q 2025

Speaker:

Since 2001, about 78% of the returns from investing in European property have come from income.

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Inelastic pops up to the left with resilient to the right and then it splits to a hallway visual

Then the word resilient pops up with people walking through a building 

Speaker:

In today’s market environment, we’re focused on income and income growth as the main drivers of returns.

We break this income down into two categories: what we call “inelastic income” and “resilient income.”

Inelastic income comes from real estate uses that are less sensitive to pricing changes and broader economic cycles.

These assets provide a stable anchor for the portfolio, delivering predictable cash flows.

Returns here benefit from yield spreads over funding costs, and also from rental indexation throughout the holding period.

Resilient income, on the other hand, comes from multi-let assets with a diverse tenant base.

This diversity reduces reliance on any single occupier.

These properties capture rental growth through active leasing, tenant turnover, and portfolio optimisation.

Returns in this category are driven by selective acquisitions and hands-on asset management.

What would be the key drivers of European real estate trend today?

We focus on sectors with three key qualities: ongoing demand supported by structural drivers; limited or constrained supply; and the potential for solid rental growth.

On top of that, markets that have already experienced rental growth can offer additional upside by capturing that embedded rental reversion.

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Visuals of apartments, industrial space, and urban residential buildings

Right now, two major forces are shaping the landscape in Europe: urbanisation and technology.

Urbanisation isn’t just a story for emerging markets. Many European cities continue to grow strongly.

As more people move into cities, demand rises—not only for housing but also for industrial space that supports local services and, of course, e-commerce.

But here’s the challenge: most European markets have a historical undersupply. There’s simply not enough residential or urban industrial space to meet the current demand.

So, how do we respond to these trends? Let me share some of our strategies.

Across Europe, there’s an estimated shortfall of nearly 10 million homes. This shortage is clear in almost every market where we invest. But we also recognise that housing affordability is a real concern in many cities.

Our goal is to find investments that address this supply shortage — but do so in a way that keeps housing affordable.

For example, in Germany, we’re modernising existing housing stock. That means upgrading older units to modern standards and adding new units through extensions where possible. Right now, we’re focused on Berlin, but we’re actively looking to expand this approach to other cities.

London’s market is a bit different. Recently, there’s been a rise in large apartment blocks with lots of amenities, which often push up costs for tenants. Our strategy here is to invest in smaller, simpler apartment blocks, bought directly from developers. These tend to be more affordable options in the local market.

We’re also partnering across Europe to develop student housing — meeting the needs of today’s students while adding much-needed housing stock in undersupplied areas.

But it’s not just about housing.

Growing urban populations also need service spaces that support modern life.

And yet since 2000, London has lost a quarter of its industrial floorspace. Manchester and Birmingham have each lost about a fifth.

This creates opportunities to invest in upgrading the remaining urban industrial assets — improving quality and leasing vacant space to capture rental growth.

Because these assets are very local and granular, we work closely with specialist operators who have a real edge in this area. We’re doing something similar in Germany and Austria, partnering with experts developing new urban logistics facilities in key cities.

Why now?

We believe that it’s an interesting time to enter the European market

Valuations have repriced.

Real estate yields are higher than financing costs.

And leverage is therefore accretive.

Together these factors provide a boost to both income returns and total returns for investors. 

Another reason to consider investing in European real estate is sustainability.

We’re seeing regulations tightening around carbon emissions and energy efficiency.

This shift places greater emphasis on refurbishing existing buildings, improving assets to meet modern standards.

It also means we’re less reliant on new developments which can also have a larger environmental impact.

Why Invesco?

Our European real estate team is truly local, covering 14 countries across eight offices.

5:16 On screen graphic image: A world map highlighting with the stat that we operate in 14 European cities across 8 office locations in Europe

Speaker:

Many of our team members have spent their entire careers living and working in their respective markets.

This gives us real-time insights, a deep understanding of local customs, and strong relationships with key stakeholders.

We combine this local expertise with a top-down approach, applying secular, trend-driven investment themes in ways that align closely with local market conditions.

Each of our local teams operates across the risk spectrum and invests in both equity and credit.  They’re active in many different market conditions and see opportunities from many different angles.

By blending local knowledge with our central views on long-term structural trends and sustainability, we’re able to source compelling opportunities at the local level.

And then we integrate them to optimise risk-adjusted returns across our portfolios.

[BACK OF MATERIAL]

Important information

This marketing communication is intended only for Professional Clients in Continental Europe (as defined below), Dubai, Guernsey, Jersey, Ireland, Isle of Man and the UK; for Sophisticated or Professional Investors in Australia; for Institutional Investors in the United States; for Institutional Investors and/or Accredited Investors in Singapore; for Qualified Clients/Sophisticated Investors in Israel; for Professional Investors in Hong Kong; for Qualified Institutional Investors in Japan; for certain specific Qualified Institutions and/or Sophisticated Investors only in Taiwan; for Wholesale Investors (as defined in the Financial Markets Conduct Act) in New Zealand, for Qualified Professional Investors in the Republic of Korea; for certain specific sovereign wealth funds and/or Qualified Domestic Institutional Investors approved by local regulators only in the People’s Republic of China; for Qualified Institutional Investors and/or certain specific Institutional Investors in Thailand; for certain specific institutional investors in Brunei and Indonesia, for Qualified Buyers in the Philippines for informational purposes only; for certain specific institutional investors in Malaysia upon request. In Canada this document is for use by investors who are (i) Accredited Investors and (ii) Permitted Clients, as defined under National Instrument 45 106 and National Instrument 31 103, respectively. It is not intended for and should not be distributed to, or relied upon, by the public or retail investors. Please do not redistribute.

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may contain references to dollar amounts which are not Australian dollars;

may contain financial information which is not prepared in accordance with Australian law or practices;

may not address risks associated with investment in foreign currency denominated investments; and

does not address Australian tax issues.

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This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.

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