EMERGING TRENDS: Investors turn to Europe's recovering markets

International real estate investors see buying opportunities in Ireland and Spain, according to the 2014 edition of the Emerging Trends in Europe report published by the Urban Land Institute (ULI) and PwC.

The competition for prime assets in Europe's major real estate markets is leading investors to turn to recovering markets such as Ireland and Spain, regional cities and secondary property in search of returns.

Emerging Trends in Real Estate Europe 2014 finds that 71% of respondents think that a shortage of suitable assets for acquisition will have a moderate or significant impact on their business during 2014. As a result of this increasing competition, 59% of respondents believe that prime property in Europe’s core markets has now become over-priced.

The report highlights that investors are becoming increasingly comfortable with taking more risk in search of returns. One of the biggest beneficiaries of this is Dublin, which has risen dramatically in the city investment rankings, moving up from 20th in last year's report to second in 2014.

The Irish capital's real estate market has been transformed from a 'no-go' location among investors only two years ago, to being one of the hottest markets in Europe, with both domestic and international investors attracted by pricing levels and Ireland's improving economic outlook. The report finds that 51% of respondents now see good buying opportunities in Ireland.

The weight of international capital is leading investors to also turn to other recovering markets, such as Spain. The report highlights that 67% of respondents believe that there are now good buying opportunities in Spain, with the acquisition of the Parque Principado mall in Oviedo by Intu and the Canadian Pension Plan Investment Board for €162 mln highlighted as an indicator of mainstream interest in the market.

However, sceptics argue that debt is very hard to attain and that it is a risky market to invest in before there are signs of any growth.

'The resurgence of investment in Ireland and how far the Spanish real estate market recovers, will be two of the key stories in 2014,' commented Joe Montgomery, chief executive of ULI Europe. 'Investor appetite in Dublin has been growing over the past 12 months with significant volumes of international capital chasing the best assets. Investor interest is now moving to Spain, where there are signs that opportunistic investors, who entered the market when Sareb opened for business last year, are now being followed by mainstream institutions. However, with limited signs of tenant demand and rental growth, questions remain as to how far the market recovery can go.'

Emerging Trends in Real Estate Europe is a joint report published annually by ULI and PwC. The report provides an outlook on European real estate investment and development trends, based on the opinions of more than 500 internationally renowned real estate professionals, including investors, developers, lenders, agents and consultants.

The entire Emerging Trends in Real Estate Europe 2014 report is available for download at the link below