As storm clouds continue to embroil the EU economy sentiment across the real estate investment community within Europe remains subdued. Merkel and Sarkozy may have the unenviable task of unravelling Europeís financial debacle, however for real estate investment professionals assuming the mantra of generating returns based performance the task over the next 12 monhts is no less onerous. Post-financial crisis real estate investment markets across Europe witnessed a flight to prime a symptom manifest in both the direct and unlisted real estate markets. Investment activity has predominantly centred on core markets and on prime stock with the appetite for risk aversion exceeded the desire for returns based performance at least in the short term. Paradoxically, the nexus of activity on coreí investment product has caused safe markets to become over heatedí culminating in the capacity to capture value being eroded. Forecasts suggest that whilst core markets will continue to deliver strong income based returns over the course of this calendar year, it is envisaged that 2012 will also witness increased levels of investment activity higher up the risk spectrum for investors with access to proficient asset management skills there is significant capacity to capture value through secondary/value added opportunities. Investment opportunities are nonetheless set against a backdrop of continued illiquidity within the banking sector (the withdrawal of Eurohypo and SociÈtÈ GÈnÈrale from the market serving to further highlight the lack of appetite for real estate lending). Indeed, the de-leveraging strategies being initiated by debt providers which have been a feature of the real estate market in Europe over the last few years are likely to continue for the foreseeable future. The funding gap created is likely to be filled to some extent by equity investors. Nonetheless, the overall volumes of investment being committed to the real estate asset class post-financial crisis remain subdued; as a consequence competition for investor capital is likely to remain intense over the next 12 months. The 2012 INREV investor intentions survey cites a downward trajectory in funding allocations likely to be committed to the unlisted real estate sector over the next 12 months relative to the same period last year. Pertinently, the same investor cohort envisages a continued increase in allocation to direct real estate consistent with an appetite for growth.