AUSTRIA - Large institutional investors will return to the Austrian property market sooner or later, and when they do, they will be looking solely for core properties, according to Franz Pöltl, head of investments at Austrian EHL Immobilien.
Pöltl said: "Open-ended funds and insurers in Germany and Austria in particular are sitting on large pools of liquidity, but they remain cautious and want to wait for what the first month brings."
He said he expected transaction volume in the Austrian property market - depending on the willingness of banks to provide financing - to range between €1.3bn to €2bn this year, compared with €1.5bn and €1.45bn in 2011 and 2010, respectively.
"The situation regarding [B-rated] properties remains tense because investors in these assets mostly need outside financing, which banks are less willing to provide," he said.
Pöltl added that insurers and other large institutional investors had not yet taken to financing such deals in Austria, as they had in other countries.
"But they are more likely to invest themselves than they did before," he said.
Pöltl expects deal volume to remain low this year, as risk-aversion is driving large institutionals into core property, of which there an insufficient amount in Austria to satisfy the demand.
"German open-ended funds are either buying core or nothing at all," he said, adding that tax advantages coupled with the relative stability of the Austrian property market were still attracting investors from neighbouring Germany.
Several major office assets are being finalised in 2012 or have already come up for sale in Vienna's prime district after major renovations.
For the first time, a building in the first district of Vienna - which consists mostly of historical buildings - achieved a green building certification following refurbishment, which is "almost standard" now for new office buildings in Vienna, according to Michael Ehlmaier, executive partner at EHL Immobilien.
Another area where Austria cannot satisfy investor demand is retail, EHL said, pointing out that only two major projects have been finalised this year.