Despite the imposition of further travel restrictions in Q1 2021, cross border investment into Europe is expected to increase this year, thanks to increased allocations to real estate in order to capitalise upon appealing yield spreads over sovereign bonds, as well as a growing trend for partnerships between non-European capital and European based investment managers, according to a new research report published by broker Savills.
The international real estate advisor predicts that, although we will continue to see European money focusing on opportunities close to home, there is also the expectation that non-European capital will build upon transaction volumes recorded last year, with European cross border investment forecast set to see an uptick in activity of 10-15% year-on-year to circa €120 bn.
‘We anticipate non-European investors will continue to seek to diversify their portfolios within Europe, particularly since sovereign bonds offer near zero returns, resulting in an enticing yield spread for real estate,’ said Mike Barnes, European research, Savills. ‘The attraction of European markets is further underpinned by its relative macro stability. Political tension, oil price volatility and a desire for geographical diversification continue to be push factors bolstering outflows towards Europe.’
James Burke, regional investment advisory, EMEA, Savills, added: ‘2020 saw ‘beds and sheds’ take an ever-increasing share of investment from cross border players thanks to the strong drive towards ecommerce and the continued long-term fundamentals of operational residential assets. As we move through the next 12 months, we predict cross border capital will continue to make its presence known across all sectors from more traditional areas of interest, like offices and logistics, to topical sectors such as life science, healthcare orientated real estate and data centres, with some more opportunistic players looking to capture potential value in areas that have been more challenged such as retail and hospitality.’
