GlobeSt.com: Would it be fair to say that the levels of concern vary across regions and prhaps across different asset classes as well?

Moylan: Absolutely. Obviously, real estate is local, and it will vary by institution according to what its risk profile is like. You might see more interest in secondary locations and certainly the more niche product types. Institutions have gotten more interested in the past year or so to finding alternatives to putting money into, say, London office space.

GlobeSt.com: Certainly, one of the attractions of secondary locations is the potential for higher yields. But often there is the concern that with higher yields comes higher risk; do you see that concern among investors at the moment?

Moylan: Yes, certainly from private real estate fund managers. They have certain IRR targets they have to hit for their investors, and they're having to move a little further afield to get them. Among institutions, it certainly varies how they feel, but they may be taking on a little bit of extra risk to achieve their IRRs.

GlobeSt.com: Preqin has reported that fundraising increasingly is becoming concentrated in the very largest managers. For managers that cannot raise capital on quite the scale of a Blackstone, what are some of the competitive strategies they rely on to attract investor capital?

Moylan: There are the things that investors always talk about: stability, and the track record of the team. Even if it's your first fund, you need to have a team that has worked well together. And certainly, being an expert in a particular area is key, too. If you can show genuine expertise in a particular market or sector—whether it's German logistics, Paris retail or whatever it is—that's a very strong selling point.

What's really difficult right now is to raise a fairly diverse, mid-market sized fund. Even if you've got a good team, it doesn't have a reason to stand out, because there's an awful lot of competition and investors might say, “well, if I want a pan-European fund, I'll just go to Blackstone or whomever else.”

CANNES, FRANCE—For a global view of institutional investment in real estate, there aren't many vantage points better than the world of private equity. Andrew Moylan, head of real estate for market intelligence firm Preqin, shared his insights with MIPIM attendees last week as part of the “World Overview: What Are the Global Indicators Saying?” panel discussion. Later, he sat down with GlobeSt.com to discuss what he and the Preqin team have seen recently.

GlobeSt.com: From the standpoint of the investor class that Preqin follows most closely, what is your sense of their activity level, here at MIPIM and more generally? Are they open generally to global investment opportunities, or has there been some pulling back?

Andrew Moylan: By and large, most aren't pulling back too much. There's still strong demand for real estate, and it remains attractive relative to other asset classes in a low interest rate environment. However, I think we're starting to see some concerns on the part of institutions, about where we are in the market, where we are in the cycle and whether now is a great time to be putting lots of money out.

It's a mixed view; we saw it in our survey, where we asked managers globally about their funds over the next 12 months. About one-quarter they're going to put out more money this year, versus another quarter that said they're going to invest less, with the rest staying roughly about the same. So, what you're seeing is people getting a little bit nervous. I don't think there's widespread pulling back, but you're starting to see a little nervousness about what might be happening.

GlobeSt.com: Would it be fair to say that the levels of concern vary across regions and prhaps across different asset classes as well?

Moylan: Absolutely. Obviously, real estate is local, and it will vary by institution according to what its risk profile is like. You might see more interest in secondary locations and certainly the more niche product types. Institutions have gotten more interested in the past year or so to finding alternatives to putting money into, say, London office space.

GlobeSt.com: Certainly, one of the attractions of secondary locations is the potential for higher yields. But often there is the concern that with higher yields comes higher risk; do you see that concern among investors at the moment?

Moylan: Yes, certainly from private real estate fund managers. They have certain IRR targets they have to hit for their investors, and they're having to move a little further afield to get them. Among institutions, it certainly varies how they feel, but they may be taking on a little bit of extra risk to achieve their IRRs.

GlobeSt.com: Preqin has reported that fundraising increasingly is becoming concentrated in the very largest managers. For managers that cannot raise capital on quite the scale of a Blackstone, what are some of the competitive strategies they rely on to attract investor capital?

Moylan: There are the things that investors always talk about: stability, and the track record of the team. Even if it's your first fund, you need to have a team that has worked well together. And certainly, being an expert in a particular area is key, too. If you can show genuine expertise in a particular market or sector—whether it's German logistics, Paris retail or whatever it is—that's a very strong selling point.

What's really difficult right now is to raise a fairly diverse, mid-market sized fund. Even if you've got a good team, it doesn't have a reason to stand out, because there's an awful lot of competition and investors might say, “well, if I want a pan-European fund, I'll just go to Blackstone or whomever else.”