#MIPIM2016 European real estate investors to target peripheral markets - Savills

International real estate advisor Savills says that European real estate investors are set to target peripheral markets in 2016.

The assertion comes as Savills published its 2015 Europeaan investment volume report at MIPIM in Cannes.

Savills recorded that the 2015 investment volume in Europe totalled over €245 bn, a year-on-year (yoy) increase of 22% and a 6% increase on the 2007 investment peak. The countries to experience the greatest increase in investment volumes in 2015 were Norway (118%), Greece (108%) and Belgium (42%). However Ireland (-14%), Austria (-16%), Denmark (-17%), Sweden (-9%) and Finland (-3%) all experienced negative year-on-year growth following weaker turnover figures in the second half of the year.

The total volume of commercial real estate transactions in Europe recorded in the first two months of 2016 was almost 30% lower than the same period last year, but very much in line with 2014.

Moving to the edges
Savills confirms that, despite investment activity slowing in the first couple of months of 2016 due to investors reacting to regional economic and geopolitical concerns, strong investment activity is anticipated within peripheral markets and markets which have not yet reached the end of their cycles: Denmark (50% market peak), Finland (69%), France (87%), Italy (83%), Netherlands (70%), Portugal (64%), Spain (82%), and Sweden (93%).

Eri Mitsostergiou, director of European Research at Savills: 'Low interest rates and loose monetary policy in Europe continued to underpin investor demand for commercial real estate last year and over half of its countries surpassed their previous investment peak of 2007/2008. The countries that witnessed negative year-on-year growth were those to have already experienced striking recovery in 2014, showing that the investment activity in these markets is gradually normalising.'

Cross-border
Cross-border investors are driving the investment activity in these peripheral markets, namely in Portugal (87% of activity attributable to cross border investment), Spain (57%) and Ireland (57%) and Italy (63%). In Spain however, domestic investors are closing in on cross border investors due to the presence of the SOCIMIs (Spanish REITs). Cross border investors outspent domestic buyers also in Poland (82%), Netherlands (69%) and Germany (61%).

Mitsostergiou: 'High competition for the best properties and low supply of new product in the market is leading investors to diversify their strategies in terms of types of assets and geographies. Interestingly these markets all share the common characteristics that they are smaller overall in size and therefore offer less significant single deal opportunities at the upswing of their market cycle.'

'It will therefore be increasingly commonplace for investors to enter these market places through portfolio acquisitions, diversifying the risk, achieving scale and speedy exposure.'