Of the 98 cities ranked in the index, the top five were Munich, Paris, Stockholm, Oslo and Luxembourg.  The surprising change in this year's index is the fall of London--historically ranked at the top of the Index--to the #8 spot.  In this market, the general sentiment seems to point to London as the best opportunity for real estate investment in Europe.  

The Nordics continue to gain in the Index, with Stockholm moving up one spot to #3 and Oslo moving up 5 spots to #4.  The region clearly scored well based on their relatively strong performance during the financial crisis and high concentration of wealthy and highly-skilled workers in the capitals.  Despite weaker exports in the Swedish economy, Stockholm remains strong due to its relative importance to the region.  Oslo, on the other hand, is the core to the Norwegian economy, which is buoyed by the country's oil reserves. 

A detailed summary of the EREGI can be found on LaSalle's website here.

The only economy in the "late downturn" category is the UK, where cap rates are at historical highs and many opportunities to purchase relatively safe properties are available.  In the "advanced downturn" category, they place the USA, France, India and Japan.  Ireland and Spain, however, are in the "early downturn" phase, indicating that much more distress may be around the corner for these economies. 

According to the report, identifying the stage of downturn should help investors select the appropriate strategy.  In the early downturn stage, investors should sell their assets (if possible) or position their portfolio to avoid a distressed sale later.  In the advanced downturn stage, investors are likely to find the best opportunities in the debt and secondary equity markets.  Only when an economy reaches the late downturn stage should investors consider making pure equity investments in properties.

To compensate for the lower fundraising activity in the market, fund managers have begun to adapt by implementing interim closes to lock in investors yet keep options open for future capital raising later.  Of the 374 funds on the road, 138 have already had interim closes.  It's worth noting that the fundraising figures above only include final closes, not interim closes.

Distressed and debt investing is a very popular theme in the real estate private equity market today, with 134 of the 374 funds in the market focused on this strategy. 

Capital raising activity in funds targeting Asia and Rest of World accounted for 25% of all real estate private equity fundraising in 2008, but so far in 2009 funds targeting this geography account for only 9% of capital raised.

Overall, fundraising is expected to increase in the medium to long term.  According to Preqin's survey, a "significant number" of investors plan to return to the market in late 2009 or early 2010.

The Fund will take advantage of over-leveraged traditional real estate assets that are in desperate need of restructuring, recapitalizing or deleveraging.  With a large amount of debt maturing over the next two years, the Fund will acquire properties from distressed sellers or banks that are looking to offload assets taken over from investors.  The Fund's management has indicated that the main opportunities will most likely be found in the UK and Germany.

Financial Times Article