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European commercial property investment activity at highest since 2007
Commercial property investment activity in Europe reached its highest level since 2007, totalling €102.5 billion in the first half of 2015, the latest market analysis report shows. The investment volume across the 16 participating countries was 25% up on the same period last year, according to the European Investment Briefing report from international real estate advisor Savills. The firm says that in line with its quarter one forecasts, the European investment market is on track to top €230 billion by the end of this year as commercial property investors continue to favour core markets, with the UK, Germany and France still accounting for 67.8% of the total volume. ‘However, the share of the markets outside of the top three countries is increasing, due to stronger investor interest for non-core countries, which offer attractive pricing and supply of large assets and portfolios,’ said Lydia Brissy, director at Savills’ European research team. ‘Overall, investors are more open to move up the risk curve. They seek future yield compression by targeting secondary or alternative assets in core cities, or prime assets in secondary markets,’ she added. The report shows that the office sector continued to dominate the investment activity in most countries across Europe, capturing about 39% of the transaction volume per country on average. The only exceptions where retail properties accounted for a higher share of property investment deals were Germany at 42%, Finland at 43%, the Netherlands also at 43%, Norway at 62% and Portugal at 83%, which saw the sale of large scale retail portfolios in the past quarter. Savills has also reported that cross border investment increased in nearly all countries across Europe and especially in the peripheral markets, where US investors have been notably active. There has also been growing interest from investors from Asia Pacific and the Middle East. The share of non-domestic investment ranged from 10% in Sweden to over 80% in markets such as Italy, Poland and Portugal. Marcus Lemli, head of European Investment at Savills, explained that international investors have continued to drive up volumes, particularly the equity funds from the US, which have been acquiring retail portfolios or landmark office buildings. This has enabled some of the more peripheral countries to record the strongest rises in investment volumes over the first six months of 2015, notably Portugal at 720%, Norway at 391% and Italy at 154%. In the second quarter of 2015 the share of US money invested out of the cross border volume has been remarkable, according to the report, averaging 40% per country, and accounting for as much as 93% in Portugal, and 66% in Ireland. ‘With healthy investor interest, Europe has seen a shift towards larger transactions. The most significant rises in portfolio deals were noted in Germany and the Nordic markets and consequently, there has been a marked uplift in activity in the regional markets,’ said Lemli. In the first half of this year, the volume of investment in regional markets rose to more than… Continue reading
Portuguese residential property market recovery ongoing
The residential real estate market in Portugal is seeing an ongoing steady recovery in prices, supported by rising demand and increasingly strong growth in sales activity, according to the latest index. While the lettings market has seen rents stable for a fourth month in succession following years of persistent decline, the index survey from the Royal Institution of Chartered Surveyors (RICS) and Confidencial Imobiliário shows. The data also shows that new buyer interest continued to rise at a firm pace across all regional markets, with growth particularly pronounced in Porto during June. But the market is still open to the weakness of the euro zone, particularly Greece. At the same time, newly agreed sales increased at the sharpest monthly pace since the survey was launched back in 2010, and have now risen continuously for around a year and a half. Going forward, sales expectations are pointing to further robust growth in the near term, even if the net balance eased slightly from the record high set in May. Given the sustained improvement in both enquiries and sales, prices continued to recover for a sixth month in succession, the index report explains. It also points out that the pace of house price growth accelerated a notch, driven primarily by the strong gains posted in Lisbon and looking ahead, near term price expectations continue to point to a stronger pick-up on the horizon. Over the next 12 months, respondents are now anticipating prices will rise by 2.7% at the national level. Again, the strongest recovery is anticipated to come in Lisbon and the Algarve at around 3%, while projections are for 2% growth in Porto. The national confidence indicator, an amalgamation of near term price and sales expectations, now stands at +36 equalling the third highest reading on record, despite easing compared to May’s exceptionally strong result. In the lettings market, solid growth in demand continues to be met with a decline in the number of new listings by landlords. As a result, rents remained more or less unchanged for a fourth consecutive month, while expectations suggest a further period of stability lies ahead. ‘It is important to see the Portuguese market’s resilience in the face of the uncertainty caused by the Greek crisis,’ said Ricardo Guimarães, Director of Ci. ‘Risks were highlighted by the agents but, nevertheless, activity indicators remained clearly positive, regarding both sales and prices. This was a critical test for the market, reinforcing its potential,’ he added. RICS chief economist, Simon Rubinsohn, believes that the recovery in sales market activity appears to be gathering momentum, driven by improving economic fundamentals and rising confidence. ‘However, significant risks remain within the euro area which could damage sentiment if a resolution is not found,’ he warned. Continue reading
Prime central London property rental values fall for first time since Feb 2014
Rental values in prime central London fell in July as stock levels held up while demand from the financial services sector became more subdued against a jittery global economic backdrop. The fall of 0.1% was the first decline since February 2014 and meant annual growth slowed to 2.9%, having peaked at 4.2% in May while prime gross yields were flat at 2.95%, according to prime central London index from Knight Frank. It explains that stock levels have been buoyed to some extent by a restrained sales market, where an increase in stamp duty for properties worth more than about £1.1 million has dampened activity and price growth. According to Tom Bill, head of London residential research at Knight Frank, as annual price growth has slowed to 2%, more property owners have opted to become landlords as they wait for the market to digest a succession of recent tax changes. He explained that this short term supply/demand imbalance means two things. First, tenants are shopping around more and securing deals has become more difficult for landlords, even after initial agreements are in place. Second, landlords have made it more attractive for tenants to remain in place, prompting higher renewal rates. ‘While seasonal demand from students has remained strong, corporate demand has become more muted despite some pockets of stronger performance,’ he said. The report points out that demand in the prime central London lettings market has traditionally been strong from the financial services sector but optimism among bankers fell sharply in the second quarter of 2015, according to a CBI/PWC survey. ‘Continued regulatory uncertainty means banks are scaling back spending plans and nervousness surrounds a possible UK exit from the European Union, the recent Greek crisis and Chinese stock market volatility,’ Bill said. ‘However, there are longer terms grounds for economic confidence, and the UK’s recovery was underlined by strong GDP figures in July. Furthermore, in an attempt to increase the appeal of London, Chancellor George Osborne plans to reduce the bank levy,’ he explained. ‘Meanwhile, Brevan Howard, one of world’s largest hedge funds, is reportedly moving senior traders back from Geneva to London, underlining the city’s dominance as a global financial centre,’ he added. Continue reading
