European real estate investors are still averse to risk and focussed on prime product, but less concerned about property pricing, according to the results of a survey of more than 270 European real estate investors by real estate adviser CB Richard Ellis. The findings were launched at the company’s European Investment Briefing held at Mipim on Wednesday.
European real estate investors are still averse to risk and focussed on prime product, but less concerned about property pricing, according to the results of a survey of more than 270 European real estate investors by real estate adviser CB Richard Ellis. The findings were launched at the company’s European Investment Briefing held at Mipim on Wednesday.
The UK has led the recovery in both transaction volumes and prime property prices in Europe over the last six months and continues to attract significant investor interest, according to CBRE. 'The transparency and liquidity of the market, coupled with the rapid adjustment in prices and the weakness of sterling make an attractive combination in a climate in which investors are still risk-averse and focussed on prime product,' commented Jonathan Hull, Executive Director of EMEA Capital Markets at CBRE. 'Any prime properties coming onto the UK market are attracting extremely strong investor interest, especially from overseas - but tenant covenant and lease length are key concerns for investors,' Hull added.
Liquidity risk is also a primary concern, and it is therefore not surprising - given the size of the markets and relatively positive recovery prospects - that France or Germany appear most attractive to over a third of respondents. 'We are now seeing a greater flow of capital to major cities beyond London, which is putting pressure on pricing particularly at the prime end of the market. But what is surprising is the strength of focus on the CEE markets, where transaction volumes have so far been extremely low over the past 18 months, perhaps suggesting that activity levels are set to stage something of a recovery during 2010,' Hull suggested. As yet, investors see fewer opportunities in the distressed Spanish market, perhaps believing that the window for entering this market will remain open for longer here than elsewhere.
The one thing that investors seem less worried about at the moment is property pricing. 'It was mentioned as their main concern by just seven investors in the survey,' noted Nick Axford, Head of EMEA Research and Consulting at CBRE. 'Current attention is clearly focused at the prime end of the market, where investors think that now is the time to buy. Almost half of respondents said that the first half of 2010 represented the best buying opportunity for prime real estate, with most of the remainder preferring to wait until the second half of this year. This suggests that investment activity in this part of the market should remain strong - provided that buyers can identify the right assets to purchase.'
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