European real estate is set to stay firmly in the spotlight for global investors with a resulting two-year window of high activity and attractive relative pricing driven by improved property investment supply, portfolio restructuring, rising prices and the impact of quantitative easing; according to a new report Capital Views - The Allure of Europe released by global property adviser Cushman & Wakefield.
At the same time, while activity has spread rapidly around all corners of Europe from the core, on to the South and now towards Central Europe, global money has lagged behind, staying close to the biggest hub markets. The UK, Germany and France took three quarters of all global money in Europe in the past year for example. According to Cushman & Wakefield this is now changing however with Southern Europe in particular coming on to the global radar. Spain for example is now the only country other than UK to draw capital from all global regions. This change is expected to accelerate in 2015 as global investors turn to more new markets across the region.
“We are in discussions with investors from Asia and Russia on a daily basis and can clearly see their increased interest in the CE region, notably in the Czech Republic and Poland. Whether they’ll come directly or through a fund structure, they are increasingly helping to drive the demand for high quality commercial real estate here,” says Jonathan Hallett, Managing Partner at Cushman & Wakefield Central Europe.
In terms of opportunities the Cushman & Wakefield report points to three clear tiers of potential where liquidity, an improving occupier and / or attractive pricing point to better than average gains. In the first tier, core markets of London, Paris and Germany continue to lead the way, followed in the second tier by a focus on the leading cities of smaller countries notably Madrid, Barcelona, Milan and Brussels. In the third tier meanwhile, the focus is shifting East and not just to the main hubs of Poland and the Czech Republic.
The make-up of investors heading into Europe is if anything going to get even more global and we’re expecting record trading volumes in Europe this year. However to achieve that, the demand side is to be honest the easy part of the equation – it’s supply that will decide whether we’re right or not. Actually having stock to buy is a key reason why Europe is attracting global capital and is also important in shaping where that capital goes once it gets here.