Editor's Choice: Investors see red away from the periphery

The escalation of the political unrest in Ukraine and the threat of economic and diplomatic sanctions against Russia will no doubt cast a shadow over this year's edition of the MIPIM real estate fair in Cannes where Russia - alongside Turkey and Brazil - is a country of honour.

Turkey's star has also lost some of its shine in recent weeks along with a number of other emerging markets following significant capital withdrawals by US investors in particular. They fear higher interest rates and a tighter monetary policy in Turkey will likely rein in the local construction and property industries.

Both events are a stark reminder of the vulnerability of the real estate industry to political, social and economic events. A recent Investment Briefing hosted by PropertyEU in London revealed that conservative money has returned to Russia in the past 12 to 24 months, but in light of the recent developments in Ukraine the question is whether it is there to stay.

Away from the periphery of Europe, there is more reason to feel upbeat about prospects for the real estate industry in the next 12 months. After putting concerns about the viability of the euro currency behind them, the premier league of real estate investors in Europe lifted their game in 2013 and went shopping. They bought more in established capitals and ventured further afield, breathing new life into abandoned markets and entering more peripheral locations for the first time in the hunt for prime and sometimes discounted stock.

Investors who are doing their jobs well should be seeing red as they travel around Europe. Red, explains Hans Vrensen, DTZ's head of global research in our inaugural edition of TOP 100 INVESTORS, Cities & Sectors, indicates ‘hot’ or attractively priced markets as measured by DTZ's Fair Value Index. In terms of offices covered by the 2014 Index, the red markets are Bucharest, Dublin, Madrid, Manchester, and Milan. Little surprise, then, that the transaction data for 2013 shows AXA Real Estate acquired two office buildings in Milan during 2013 at a tantalising 10.5% yield. Altogether the Paris-based fund manager bought and sold properties worth €6 bn in 2013, making it by far the most active real estate investor in Europe in 2013, according to our latest Top Investors ranking.

DTZ's Fair Value Index also shows that the outlook for the European logistics sector remains bright after the sector saw the largest increase in transaction volumes relative to other real estate segments in Europe in 2013. Indeed, logistics property investment volumes increased by about 50% to over €14 bn over the year, the highest figure by some distance since the €20 bn recorded in 2007, according to CBRE.

The development engine has already started to rev up again: Sydney-listed Goodman Group leads our ranking of top developers for the third year running after seeing the volume of completed projects over the past three years jump by 25%. With the prospect of robust rental recovery, the logistics sector is heading a recovery of the real estate industry in Europe. Despite the rumblings at the periphery of Europe, it does seem that the worst of the financial crisis may be behind us.

The full ranking of the 100 most active investors in Europe in 2013 and an overview of the cities and sectors where they transacted deals will be available at MIPIM next week in our new publication TOP 100 INVESTORS, CITIES & SECTORS. Visitors at the world’s leading real estate fair in Cannes should watch out for our hostesses who will be handing out the first editions at the entrance to the Palais des Festivals.

Premium subscribers can click on the following link to read Top 100 Investors, Cities & Sectors online.

Judi Seebus
Editor in Chief

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OTHER HEADLINES THIS WEEK
US investment funds buy AIB's €7.3b UK loan book
Invesco buys Paris tower on behalf of Asian client
ECE fund acquires G3 shopping centre in Vienna
Asian insurers award €145m mandate to CBREGI
Invesco Real Estate opens office in Poland
AEW raises €85m for Logistis fund
Greenman becomes first Irish AIFM authorised property investor