Investments in European Commercial Real Estate Increase by a Third
The EREII study revealed a sharp turnaround in investor behaviour.
The volume of real estate investments in the Czech Republic reached 1.164 million Euros last year and is expected this year to increase to 1.700 million
The largest real estate transaction so far in 2014 is the sale of Fashion Arena Sterboholy for 71.5 million Euros.
The volume of investments in commercial real estate in Europe was 166 billion Euros in 2013.
This represents an increase of 30% compared to 2012.
The most attractive market this year is predicted to be Great Britain (a trend which continues for the third year running).
Investment will flow mainly into the office and logistics sectors.
European investors remain conservative and invest primarily in the European market.
Investments in Europe from other continents amounted to 42 thousand million Euros in 2013, up from 24 billion in the previous year.
The regions most actively investing into European real estate are North America (21 billion Euros), Asia (10 billion Euros) and Middle East (10 billion Euros).
Last year the volume of investment in the commercial real estate market in Europe climbed to 166 billion Euros, the greatest amount since 2007. This volume represents a 30% increase compared to 2012 and investor interest has increased dramatically. In the last two years, most investments were in Great Britain, Germany and France. The results are based on the European Real Estate Investor Intentions study by CBRE.
”The study was conducted at the end of this January and February, and was participated in by a total of 387 respondents, mostly from Europe, representing a broad spectrum of real estate investors: These included asset and fund managers as well as representatives of pension funds, insurance companies, real estate companies and real estate investment funds”, Klára Bejblová, Senior Researcher at CBRE explains details of the study.
Consistently attractive UK and growing popularity of Spain
For European real estate investors Western Europe remains the preferred territory, followed by Central and Eastern Europe. North America came out third in the investor ranking.
This year, investors will be particularly interested in the UK, which replaced Germany in the top spot. Spain, which occupied third place, recorded the largest growth in popularity with investors. Italy and the Netherlands also gained. Alongside Germany, the Nordic countries and Central and Eastern Europe also decreased in popularity.
A similar reversal was also recorded in the ranking of cities. London still holds the leading position in popularity, but Munich, Paris, Warsaw and Hamburg all lost points. In contrast, Madrid and Amsterdam gained significantly and Barcelona gained a spot among the ten most attractive cities for real estate investment.
The real estate investment market amounted to almost 65 billion Euros in the UK, 30 billion Euros in Germany and 15 billion Euros in France.
Investors are looking for alternative investment options
Offices are the preferred type of property that investors wish to focus on this year. The logistics sector holds second place. Shopping centres occupied third place, but compared to 2013 they declined in popularity from 17% to only 11%.
Whereas in past years investors sought only prime products, today they are not afraid to invest in high-quality secondary real estate. An interesting fact is that investors in 2014 are looking for alternative investment opportunities and venturing into a greater risk. The most attractive alternatives include leisure activities, student housing and health care.
More than a third of investors will invest 20% more this year compared to last year
More than two thirds of investors expect their investment activity will grow this year. As much as 35% of investors expect this year to invest 20% more than last year. The greatest obstacles to investors are a lack of suitable opportunities, high costs of real estate and high competition in the real estate market. This is a very interesting turn due to the fact that in recent years the greatest obstacle has been unavailability of loans (in 2014, however, this obstacle was mentioned by only 7% of respondents). This means that banks are becoming less cautious when it comes to financing real estate, More than 30% of the participating companies perceive the following as significant threats to the European market for commercial real estate: Overestimation of real estate, increases in interest rates, threat of high inflation and government austerity policies.
Conservative European investors invest only at home
While European investors continue to seek investment in their own continent investors across the globe are much more interested in real estate outside of their home continent. The European and North American markets are especially attractive to global capital. The influx of investment in European commercial real estate from other continents has grown in 2013. The total investment into the European real estate market from other continents in 2013 was 42 billion Euros, up from 24 billion in 2012. The most capital flowed in from North America (21 billion Euros), Asia and the Middle East (each with 10 billion Euros).
Increased activity in the commercial property market had been monitored by CBRE in recent months in the Czech Republic. While in 2013, the volume of real estate investments in the Czech Republic was 1.164 million Euros, in 2014, the investment volume is expected to grow to nearly 1.700 million.
The situation is commented on by Tomáš Jandík, Capital Market Agent at CBRE: “The most attractive type of assets for 2014 in the Czech Republic are industrial properties, where prices have still not adapted to the improving fundamentals of the logistics market. In office and retail real estate, there is continuing low supply of quality products and large differences in prices depending on location, quality of lease agreements and competing projects under construction. Very interesting opportunities present themselves in the centre of Prague, which is going through an increased period of construction which is unusual for this location”
The largest real estate deal so far this year is still the sale of Fashion Arena Sterboholy outlet centre for 71.5 million Euros. Other significant transactions included Praha City Center in Prague for 51 million and the KPMG headquarters in Prague-Florenc at almost 34 million.
"The return on investment is also positively supported by the increased willingness of banks to finance projects for increasingly favourable conditions, and the availability of bank financing for the average investment is no longer a problem", says Tomáš Jandík.