Cross-border capital to flow into second-tier markets: Colliers

Regional cross-border capital flows will be a trend in peripheral markets and second-tier cities in Europe next year, Collier International has predicted.

In a report featuring 10 predictions for European real estate in 2014, Colliers said flows from Asia and the Middle East as well as North Africa will continue to find their way into core European markets pressuring yields and putting upward pressure on capital values.

A lack of institutional-grade stock and keen competition in core markets will drive renewed investment and development activity in peripheral markets and second-tier European cities EMEA wide, but especially in the German ‘alternative twenty’, the Polish ‘Big Six’, Spain and Ireland. Pension funds and insurers are set to take on a much greater volume of real estate loans and debt placements as bank balance sheets continue to shrink.

Commenting on Spain, Colliers said that if 2013 was the 'year of transition' with banks restructuring and selling off servicing platforms and non-performing loans, 2014 is likely to be the 'year of consolidation and stabilisation'. This will involve cross-border opportunistic investors exploiting a widening yield gap between prime and secondary. Occupier markets will remain weak as lack of finance and business uncertainty means that business will remain cautious. High unemployment may pressure government and cause slippage in EU deficit targets.

The Irish economy will continue to improve with an export-led recovery, the report says. Recovery in the Central Dublin residential and commercial property markets will continue, with international businesses continuing to be attracted by low corporate taxation rates and competitive labour costs.

Click on the link below for Colliers' full report entitled '10 EMEA predictions for 2014'.