For years now, European real estate investors have enjoyed the good life — easy money, improving fundamentals and robust demand for all property types. But suddenly, in the summer of 2007, investors found themselves in a new environment. Debt became very expensive. Yield compression appeared to stop or even reverse course. And transaction velocity slowed as investors headed for the sidelines. Does the new investment climate pose unforeseen risk, or is it an opportunity for cash-ready buyers?

With sincere apologies to Aldous Huxley, it seems that institutional real estate investors have been living in Utopia in recent years. It was not merely a soma-fuelled party. Rather, a variety of factors conspired to create an enviable investment environment of unbridled enthusiasm: ample and inexpensive debt; sizeable and rising allocations for virtually any commercial real estate asset; strong underlying economic growth across the United Kingdom and continental Europe; impr