REAL ESTATE – Recent figures from European real estate firms show that there’s continuing investment in the asset class despite declining average yields.
Yet much of the investment is taking place outside investors’ domestic markets.
French firm Klepierre reported above-target investments of €780m, primarily in Eastern Europe, as increased competition between investors and “abundant funding” for investment pushed down French real estate yields.
Cofinimmo said the Belgian market in 2005 had been characterised by a lack of quality assets for sale and inflated prices. Yet it made acquisitions in its domestic core market last year worth €278m, with yields of above 6%.
Spokeswoman Séverine van der Schueren said: “We won’t buy something that doesn’t have a positive impact for our shareholders and we don’t buy properties that are too expensive.
“In the areas we’re interested in – the best districts in Brussels – there is competition despite high prices in the rest of the market. But we develop properties in need of refurbishment and for that you have to have an intimate knowledge of the market. The fact that Belgium is our core market makes a competitive difference.”
One investor with faith in its home market is Finland’s Sponda. In a recent results statement, the firm said it plans to expand beyond capital Helsinki to office and retail properties in mid-sized Finnish towns despite a drop in domestic yields last year of 0.2—0.7%. It will focus the new investment via a fund launched with Jer Europe Fund II Holdings, in which it holds 20%. The fund has a target size of €150—400m.
The Finnish firm said it was also looking to invest in Russia and the Baltic countries, though it had no immediate acquisition targets. Investor relations manager Pia Arrhenius said: “Currently yields in the Baltics are the same as in Finland but in the Baltics there is higher risk. There is a demand for new space from Finnish businesses operating in Russia, which is Finland’s number one export partner.
