International real estate advisor Savills has forecast a slowdown of investment activity in the European property sector during the second half of 2011. Nevertheless, Savills said that some European markets - including France, Germany, Ireland and Norway - will beat 2010 levels in terms of annual turnover.
International real estate advisor Savills has forecast a slowdown of investment activity in the European property sector during the second half of 2011. Nevertheless, Savills said that some European markets - including France, Germany, Ireland and Norway - will beat 2010 levels in terms of annual turnover.
In its latest European Investment bulletin, which surveys commercial real estate investment markets across 18 countries, the firm forecasts that total volumes will be up 2.1% overall but identifies areas where performance will be stronger. However, with first-half year results at 7.9% higher than the same time period in 2010, Savills predicts a slowdown in H2 volumes.
European research director Eri Mitsostergiou said: 'The market is drying out of prime investment opportunities and the uncertainty around the global economy is again rising. The investment activity expansion has slowed down and our forecast for the year reflects this with a marginal increase on last year. The majority of investors have targeted office markets to date but with uncertainty in some occupational markets we are seeing an increased focus on retail.'
Due to strong investor interest in prime assets average prime yields in the surveyed countries remained stable in Q2 2011 compared with the previous quarter, according to Savills, and stand at 6.3% for prime shopping centres and 7.4% for prime industrial warehouses.
Prime Central Business District (CBD) office yields moved in by 15 basis points to 5.75% in this period while the prime-secondary CBD office yield gap has expanded by almost 60% since its lowest historic levels in 2007, at 97 basis pointss.
Mitsostergiou added, 'Prime yields are back to their long-term average levels, following a period of strong investor interest for prime assets. Overall investors remain wary of secondary markets amid downside risks to the European economic outlook. However, some specialist players have started exploring the best opportunities in this market segment.'
