A number of Europe's non-core markets are bucking the trend in terms of falling cross-border activity and mega deals of €100 mln and above, Savills has reported on the first day of Expo Real in Munich.
While cross-border investment volumes dropped in the core markets during the first half of the year, Savills confirms that they increased in the peripheral markets of Ireland (+81% year-on-year), Italy (+20%) and Poland (179%). The Nordics also saw an uplift in cross border activity in Sweden (+245%) and Finland (+63%).
'These non-core markets are all at an earlier stage of the current investment cycle,' said Eri Mitsostergiou, director of European Research at Savills. 'With prime yields in most of the segments of these markets still above the European or core average and with potential for further yield compression, these markets are offering more attractive returns for investors.'
The highest yield compression shift (prime CBD yields) in Q2 16 compared to Q2 15 for prime CBD offices was observed in Milan (-75 basis points), Warsaw (-75 bps), Brussels (-70bps) and Amsterdam (-60 bps). This compares to -11 bps for the average prime core office yield, which was at 4.26% in Q2 2016.
In terms of the volume of mega-deals transacted in Europe during H1, Austria (yoy +233%), Ireland (+88%), Sweden (+56%) and Italy (+58%) all performed exceptionally well. On the contrary, Savills reported an average of 31% yoy decline in the volume of megadeals transacted across the continent.
For the past three years, cross-border investors with plenty of capital have been the dominant parties in the purchase of large-scale assets and portfolios, and the core markets of Germany, France and the UK have seen the highest levels of activity. However, this year, these market have experienced the most significant drop in the volume of megadeals transacted: Germany (-47%), France (-27%), UK (-41%) and also Spain (-47%).
