Industrial markets in Belgium, Denmark and the Baltics topped DTZ's European Fair Value Index for Q2 2015.
Industrial markets in Belgium, Denmark and the Baltics topped DTZ's European Fair Value Index for Q2 2015.
The top five most underpriced markets in Q2, according to the Fair Value Index, are all industrial, but located in different parts of Europe: the Baltics, Benelux and Nordics. The top three markets are as underpriced by 20% and more, according to DTZ’s fair value analysis, with Brussels offering the best value, at 24% below fair value. In contrast, many core European markets are classified as fairly priced.
Matteo Vaglio Gralin, associate director at DTZ, said: 'Looking forward we expect the fair value index to fall further as more European property markets become fully priced. However, investors willing to seek them out will still find attractive opportunities.'
Strong investment activity is seeing property yields continue to fall in many European markets, with the best buying opportunities existing in the industrial sector, according to the research.
The European Fair Value Index identifies Europe’s most attractive office, retail and industrial markets for prime commercial property investment over a five-year hold period. The report shows that Europe still offers plenty of opportunities to invest, with 46 markets classified as underpriced in the Q2 analysis.
DTZ’s overall Fair Value Index for Europe fell to 62 in Q2 2015 from 69 the previous quarter, meaning that although commercial property markets are still attractively priced, their relative value compared to government bonds has deteriorated, narrowing the window of opportunities for investors.
Magali Marton, DTZ’s head of Research for EMEA, said: 'The European commercial property market continues to offer attractive opportunities for investors and we think industrial property in particular offers good value due to its high yields. The progress made towards a new Greek bailout agreement has lessened the uncertainty over the Eurozone and its property market, although Greece’s long-term future remains in question.'
Investor demand for European property maintained strong momentum in Q2 as volumes almost reached 2007 levels on rolling annual figures. Strong investor demand saw prime yields fall this quarter in 40% of the 117 markets in DTZ’s European Fair Value Index, causing the overall index score to fall.
Fergus Hicks, DTZ’s global head of forecasting, said: 'There are still plenty of opportunities to invest in European property, which continues to look appealing against the low bond yields which are prevailing at the moment. Germany for example is looking attractive, with a good balance of under and fairly priced markets.'