Despite the geopolitical uncertainties looming in the year ahead, the outlook for European real estate remains positive with a broadly supportive economic backdrop and bullish market sentiment. Even Spain, one of the hardest hit European countries during the 2008 financial crisis, has come back strongly and is now seen as one of the stable investment bets in the region.
The image of the Trump Tower on the cover of our February issue is not just a topical reference to the installation of its name giver on 20 January as the new president of the US. For this edition, PropertyEU revisited an interview our co-founding editor Paul Wessels held with Trump in Atlanta in 2007.
It reveals a real estate empire heavily dependent on foreign capital with business dealings across the globe – in sharp contrast to the ‘America First’ rhetoric peddled by the president during his election campaign and inauguration speech. It also reveals how a Dutch investment in a Trump Tower venture turned sour in 2010.
Potential headwinds
With a mercurial real estate veteran in the White House, the UK poised to start exit proceedings from the European Union in March and elections looming in a number of key European countries including Germany, France and the Netherlands, the geopolitical thermometer is pointing to potential headwinds in the year ahead.
But the outlook for European real estate remains positive, expert panellists at our Investment Briefings in Frankfurt, Madrid and Warsaw agreed in recent weeks. For his part, David Hutchings, head of investment strategy EMEA at Cushman & Wakefield, sees risk and volatility continuing to dog 2017, but claims ‘real estate should have the wind in its back for the best assets and locations’.
A number of institutional Finnish investors are betting on Germany as one of the winning locations and they are not alone. Transaction volumes in Germany overtook the UK for the first time in 2016 since 2012, due to the cooling down of the London market in particular. Thomas Barrack, CEO of US private equity company Colony Capital, and incidentally one of Trump’s key advisors, believes that Europe as a whole represents a big opportunity. Interestingly, his firm has also been targeting Germany, in particular Berlin, as well as markets such as Ireland, our CapitalWatch editor Robin Marriott writes in his monthly column.
For 2017, Hutchings sees room for prime yields in Western Europe to tighten by 30-40 bps while rents are set to rise by 2-3% across the board. Spain in particular is well positioned for the coming years, our Madrid briefing heard. Following its new-found political stability, the country is heading for a period of sustained and sustainable growth as it continues to move from being one of the most uncertain to the most stable market in Europe. As David Brush, chief investment officer of Merlin Properties, put it: ‘Spain is the adult in the room.’
Judi Seebus
Editor in chief
