Investor will seek to diversify portfolios in 2016, says Savills

Strengthening confidence in the occupational market will further enhance the appeal to European commercial real estate in 2016, according to Savills.

The total investment volume in 2015 amounted to a record investment volume of €235 bn in, up 17% on 2014, and above the pre-recession peak. A more moderate 3-5% increase is anticipated for 2016, Savills said in its report entitled 'Themes for European Property in 2016'.

'Investment volumes will be spread more evenly across the continent in 2016, as investors actively seek to diversify their portfolios,' said Marcus Lemli, head of Investment for Savills Europe,

Already, some 25% of the total invested in European commercial real estate in 2015 can be attributed to the purchase of assets beyond the traditional office and retail sector. The appetite for non-traditional assets has grown over the past few years due to investors seeking secondary assets in non-core locations to avoid fierce competition for highly priced traditional assets.

'What is principally fueling investor interest however are the inevitable demographic changes across the continent,' commented Lydia Brissy, director of European Research at Savills. 'The ageing population in Europe and the profile and affluence level of ageing 'baby boomers' means that there is a need for more and improved healthcare facilities.'

Investing in private clinics and care homes is a trend that has already emerged especially in markets with above average affluence levels, such as the UK, Germany or France, as investors are taking advantage of the opportunity to secure long term income streams.

Another ramification of inevitable demographic changes is extensive urbanization, and the demand for affordable ‘micro-living’, especially in Europe’s megacities. As a result, institutional investment in residential property, such as student housing, has continued to attract healthy levels of investment over the past 12 months, particularly in cities with large student communities in the UK, The Netherlands and Germany.

'We expect this trend to continue to expand in megacities such as London, Paris and Madrid, where younger generations are being priced out of the housing market, but also in growing innovation hubs such as Dublin, Barcelona, Amsterdam and Stockholm,' said Brissy.