Cross-border players dominate property investment in peripheral Europe

International players dominated Europe's peripheral investment markets in the first half of 2013, accounting for almost 60% of transactional activity in Italy, Spain and Ireland.

The figure compares to 40% in 2012, new research from property adviser Savills shows, indicating a rise in confidence among European investors.

Investment volumes have risen by 10% year-on-year in Italy, 51% in Spain and over 300% in Ireland in H1 2013 with activity expected to rise further in the second half of the year. Overall first-half investment volumes in the 12 countries surveyed by Savills reached just under €50 bn, up 3% year-on-year.

'Cross-border investors are increasingly looking for opportunities in peripheral markets where re-pricing offers attractive income return potential and better prospects for yield compression as the economic outlook gradually improves,' said Eri Mitsostergiou, Savills European research director.

The scarcity of prime shopping centres has resulted in reduced retail volumes across Europe (-11% y-o-y) whilst industrial investment increased by 22% across the region. Offices remain the preferred asset type accounting for 51% of investments in H1 2013.

'We anticipate the year-end investment turnover figure to be in line with or just below the 2012 total of €110 bn,' commented Marcus Lemli, Savills head of European investment.

In terms of yields, the difference between prime yields in core and peripheral markets has started narrowing, mainly led by yield compression in Ireland where prime yields have moved in by 200 basis points over the last 12 months (prime CBD offices). The average yield in the surveyed area stands at 5.3% for prime CBD offices, at 5.9% for prime shopping centres and 7.5% for prime logistics sheds.