Savills: Where are the next core and value-add opportunities for real estate investors in Europe?
Real estate remains an assets class of choice in Europe and the amount of capital invested in the real estate market remains significant, according to Savills.
“We are seeing that prime CBD offices will continue to offer opportunities for core investors in Amsterdam, Athens, Brussels, Copenhagen, Lisbon, London, Luxembourg, Milan, Oslo, Paris, Prague and the top German, Polish, Swedish and Spanish cities,” said Lydia Brissy, director, European research, Savills. “Those looking for value-add opportunities could consider PRS and retail in regional cities in Austria and Dublin as an interesting investment opportunity as well as office refurbishments in the suburbs of Brussels, Paris and Prague.”
Brissy, added, “Other value-add opportunities exist in the care home sector in Denmark, logistics and retail (parks) in Poland and Sweden, prime high street refurbishment in Milan and Oslo, hospitality in Greece and student housing in Amsterdam. Another interesting value-add opportunity we have identified is the (re)development in cities with strong urbanisation, hubs of innovation and brainpower such as Lisbon, London, Paris, Amsterdam, Berlin, Bucharest, Frankfurt, Barcelona, Copenhagen, Stockholm and Dublin.”
The spread between the average 10-year bond yield and the prime office yield is at 248 basis points (second quarter 2018) compared to 180 basis points in 2008 and a 10-year average of 237 basis points. In strong markets, the number of under bidders for large deals exceeding €500 million ($574 million) generally ranges between three and five. For smaller investments (< €100 million/$115 million), it generally ranges between 10 and 15. Some European markets also recently witnessed an increasing number of off-market deals, revealing sellers’ confidence in finding the right offer.
“Europe remains an attractive investment proposition for investors, supported by an expanding economy, low unemployment and healthy occupier demand for both traditional and alternative building uses,” said Marcus Lemli, head of Savills European investment. “Based on our first quarter – third quarter 2018 preliminary figures we expect Ireland, Poland, Portugal and Greece to stand out showing strong annual increases of approximately 80 percent. Investors into European real estate continue to focus on the core markets, which still account for 67 percent of the total investment volume in Europe in line with previous years and are increasingly looking for opportunities in the other markets. While we expect offices to remain the asset class of choice despite compressing yields, investors who are happy to look at countries on a city and asset level, are still able to find 5 percent –plus yields in Europe.”
To read the full report, click here.
