EUROPE - European governments will be forced to sell real estate assets to balance public finance in the next 12 months, according to CB Richard Ellis (CBRE).

With several countries recently announcing deficit-reduction plans, the motivation to sell public sector owned property assets to raise capital will become more widespread, the said.

CBRE said a number of governments, including the UK, Germany, France and Greece, were preparing to step up efforts to sell public property more actively.

Sales of government-owned real estate in Europe, which has represented 2-2.5% of total market activity over the past four years, reached €840m in 2009.
CBRE said the figure could well increase this year.

Richard Holberton, director of EMEA research and consulting at CBRE, said: "Several European governments are looking to secure real estate disposals on a large scale.

"The volume of these asset sales is likely to increase in the coming year or so, as governments look for ways to shore up public finances.

"The average deal size of last year's government asset transactions was generally quite small, averaging €10m.

"It is likely to be a similar story this year as buyers avoid larger buildings that carry vacancy risk, but we expect the practice to be more widespread."

The UK government has announced its intentions to sell around £35bn (€42bn) of public sector assets over the next 10 years, with properties expected to include student housing and infrastructure.

In Germany, the government is continuing its longstanding commitment to public sector and residential sales at a more local level.

Germany made up 42% of European public sector sales last year, and its contribution to the European total has averaged 30% over the past four years.

Bundesanstalt fur Immobilienaufgaben (BIMA), the company responsible for the disposal of state-owned properties in Germany, has been given the target of offloading approximately half of €6.8bn worth of properties within the next five years.

France, Italy and the Netherlands each accounted for 10% or more of all European public sector sales in 2009.

In total, the four largest contributing countries accounted for nearly 80% of last year's activity in the region.

Holberton said investor appetite for government-disposed buildings would vary depending on the reason for the sale and the type of the asset.

"Investor demand is likely to be strongest for prime assets, such as offices that governments will sell but continue to occupy, generating long government-backed income streams," he said.

"Prospective buyers for these types of assets would include institutions such as local and overseas pension funds, insurance companies and German open-ended funds.

"Surplus buildings in poorer locations and with possible vacancy risk will attract less interest from buyers."
 

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