Austrian property investment soars to peak €4.8bn, half from Germany - CBRE

Georg Fichtinger, Head of Investment Properties, CBRE Austria © LinkedIn

Investment in property in Austria hit a record €4.8bn last year, says adviser CBRE, easily beating the prior €3.9bn peak in 2015. Over half of the allocations came from German investors. But 2018 is unlikely to repeat this peak performance.

The first half of the year, at about €2.55bn investment, was slightly stronger than the second, CBRE said in a release. "However a trend that has been evident throughout the year 2017 is large-volume investments," it added. In all, 11 transactions with investment volumes of over €100m took place. "This result emerged fairly early on so that we have been expecting a record year since the middle of the year," said Georg Fichtinger, Head of Investment Properties. "However, we have to mention also that we are include forward deals that have been signed, whereas up to 2016, the deal closing was decisive in the numbers."

By far the most important asset class in 2017 was office real estate, accounting for around 65% of all investments. Allocations to retail came in at about 12%, and those to residential comprised about 11% of total. German investors were responsible for just over half of all investments, followed by domestic investors at 30%, and other international investors - above all French and Luxembourgois - at around 19% of total.

Prime yields in all asset classes again declined - by around 10bp: office real estate slipped to 3.90% (2016: 4.00%), high street retail to 3.30% from 3.40%, shopping malls to 4.00% from 4.10%, and retail parks to 5.60% 5.70%. But Fichtinger does not expect 2018 investments to repeat the record performance. "After such a record year, it's not easy to make a forecast," he said. "We assume that 2018 will be a good year, but that the record of 2017 will not be reached."

The Austrian capital Vienna attracted the bulk of the lettings but was slower than expected - falling to just 192,000 sqm, far below the 329,000 sqm let in 2016. "The low leasing performance correlates with completion volumes," said Olivia Prinz, CBRE associate director of Office Agency. Only 154,000 sqm of new space was completed last year, of which some 70% was pre-let or for own use. Rents changed only marginally, remaining at a peak of €26.00 sqm pcm in good locations. The vacancy rate continued to fall however, to 4.9% at the end of 2017 from 5.3% a year earlier.

"Nine major lettings, each with more than 3,000 sqm, accounted for around a quarter of all lettings," Prinz added. "In general, we are seeing a greater interest in larger areas than just a few years ago."

Looking at nationwide retail property leasing, CBRE counted 32 new retailers entering Austria for the first time in 2017, down from 37 in 2016 but equalling 2015. "New entrants are still very much driven by the fashion and sports industry," said Walter Wölfler, Head of Retail Austria & CEE. "There is obviously still potential in Austria since the new entries either focus on Vienna's city centre or one of the large shopping malls for their first stores." He expects lower lettings in shopping space for the current year. By year end, prime rents for high street retail in Vienna were at €310 sqm pcm, in shopping centres €120, and in retail parks €14.

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