#MIPIM European investment volumes to grow 5-10% in 2015 - Savills

European real estate investment volumes could top €210 bn in 2015, up 5-10% on the €199.3 bn transacted in 2014, according to estimates from adviser Savills.

The firm predicts that first-quarter investment will reach around €38 bn, in line with volumes recorded for the same period last year.

Marcus Lemli, head of European investment at Savills, commented: ‘We predict that 2015 will be another strong year for European investment and will continue on the upward trajectory we saw in 2014 with total volumes increasing by 36% year-on-year from 2013. The quantitative easing programme announced by the ECB, the expected devaluation of the Euro against other currencies and low interest rates will all help to continue to make Europe an attractive place for real estate investment.’

The trend towards mega deals – of over €1 bn – will continue in 2015, according to Savills. Over €7.7 bn was invested in mega deals in 2014, an 80% increase on 2013. The UK and France captured around 92% of mega deals last year, of which portfolio deals accounted for 65%. Office investment accounted for 72% of all mega deals with retail investment totalling 28%.

The firm forecasts that the yield gap between core and peripheral markets will continue to harden in 2015. As a result of strong yield compression in the peripheral markets the yield gap narrowed in 2014 to 168 bps.

Non-CBD office yields moved in by 36 bps in 2014 and the growing appetite for logistics assets also translated into yields hardening, with the average prime industrial yield moving in to 6.87%, 40 bps down from 2013.

Lydia Brissy, director of European research, added: ‘The competitive pricing in prime segments and the lack of supply will ensure continued investor interest in 2015 in peripheral markets and secondary assets in core markets. This will cause yields to continue to harden and in addition we predict we may see some parties start to consider tactical sales to capitalise on the recent bounce in values. This could bring more prime opportunities to the market which would in turn trigger even strong appetite from investors hoping to catch the cycle.’

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