Investors stuck to the forward transactions route to acquire European office properties in the second quarter of 2020, indicating that investor demand for the asset type is still alive despite concerns over future needs for corporate space, according to the latest report by Real Capital Analytics.
Forward commitments leapt to a record proportion of European office deal volume, with the jump in share reflecting the resilience of these deals and the slump in the office market overall.
The purchases of properties still under development came to just over €3.3 bn in the second quarter, up from €3.0 bn a year ago and representing 22% of total office asset sales.
Transactions of standing stock, meanwhile, declined 55% year-over-year.
Tom Leahy, senior director, EMEA Analytics at RCA, said: ‘Forward transactions have traditionally held appeal for institutional investors as a means to acquire good quality offices, especially in markets where the flow of existing buildings onto the market has been constricted, competition for assets is steep, and prices have climbed. New buildings will often incorporate the latest technology and better meet environmental standards. To boot, because of the additional complexity of these deals, whether in the form of forward funding (development finance) or a forward purchase, competition can be thinner.’
Leahy added: ‘Paris was the most active market for forward commitments in the first half of 2020 and the trend was also evident in July. La Francaise completed the €150 mln purchase of an office building in Malakoff, just to the south of Paris, on behalf of a consortium of investors.’
The 22,000 m2 building will complete in 2021 and is let to aerospace firm Safran on a nine-year lease.
Another notable deal, this time in Belgium, was Deka’s acquisition of the Silver Tower office in Brussels. The building was purchased for €200 mln at a yield of 3.3%, which is below the current reported prime yield for offices in the city. The asset is let on a long lease to the Brussels Regional Public Service (SPRB), which puts the deal at the safe end of the risk spectrum.
