Warsaw and Madrid offices in favour with risk takers: Savills

The office markets of Warsaw and Madrid are in favour with investors seeking to move up the risk curve in 2010, while London and Paris CBD offices are preferred by risk-averse buyers, according to the latest European hot spots survey published by real estate adviser Savills.

Giles Wilcox, head of European cross-border investment at Savills, said buyers are polarised between the 'risk averse' and the 'risk embracers', with development again on the agenda. 'Timing will be everything,' he noted. The findings are based on European leasing trends and prospects, the state of the development pipeline and investment pricing.

For investors seeking to embrace risk, top investment bets in 2010 are offices in Warsaw - where vacancy rates have fallen from 7.8% to 7.2% - and Madrid, which is expected to attract international investors for larger transactions due to its restrained development pipeline from 2011. Italian retail ranks third as investors bet on a recovery in consumer spending for 2010/2011.

Speculative development in Tier 1 cities is also seen as attractive in the risk category as investors with access to financing look to exploit the very low levels of development completions between 2011 and 2014. Meanwhile, Paris La Defense and London non-CBD office markets are expected to see investor interest due to their less aggressive yield movement than core coupled with a shortage of Grade A space in the CBD markets.

For risk-averse investors, top investor bets are CBD offices in London and Paris, followed by German regional city retail, pan-European shopping centres and Swedish prime offices and retail. Sweden's GDP is forecast to grow by 2.3% this year and household spending by 1.9%, providing a positive focus for those fixed on a stable economy.