CBRE upbeat on 2008, rental growth will drive investment

Real estate adviser CB Richard Ellis is cautiously optimistic on the investment outlook for the European property sector in 2008. Speaking at a presentation at MIPIM, CBRE’s head of EMEA research Nick Axford pointed to the fact that despite the overall dip in the fourth quarter of 2007, investment levels in Europe reached the record level of EUR 45 bn last year.

'We don't want to appear overly optimistic, as there are serious issues we need to face, but the picture is certainly not as bleak as some have painted it,' Axford said. 'We now seem to have a Europe of two halves, but most European markets saw record levels of investment last year, and 55% of this was cross-border investment. Europe is clearly opening up.'

Given the disparity in yield shifts between the UK and Europe, with yields rising and asset values falling much more sharply in the UK than in Europe, it is clear that these are no longer the drivers of real estate returns, he said.

'Outperformance in 2008 is more likely to come from rental growth,'; Axford said. The dominant buyers will be players who can actively manage property to create value, he added. European companies may not be growing very rapidly, but they are moving to new and better locations.

The biggest drag on investment growth will be the sheer lack of quality product in some markets, most notably certain fast-growing countries of Central and Eastern Europe, he said.