Office, standing stock, developments or refurbishments, continues to offer opportunities for core and value-add real estate investors in Europe, says adviser Savills. In value-add there are good prospects for resi and retail in specific markets.
In a new report, Savills said office property is now being boosted by business expansion, employment growth and a significant need for modern premises. In certain countries, other asset classes including hospitality, private rented residential sector (PRS), student housing and care homes could attract investors. "The key themes as the cycle prolongs are rental growth, opportunities from developing or re-positioning properties and locations as well as long-term income both from traditional property types and alternatives," Savills said.
Offices, office developments and office refurbishments continue to offer opportunities for core and value-add real estate investors alike.
Lydia Brissy, Savills director, European Research, said: "We are seeing that prime CBD offices will continue to offer opportunities for core investors in Amsterdam, Athens, Brussels, Copenhagen, Lisbon, London, Luxembourg, Milan, Oslo, Paris, Prague and the top German, Polish, Swedish and Spanish cities. Those looking for value-add opportunities could consider PRS and retail in regional cities in Austria and Dublin as an interesting investment opportunity as well as office refurbishments in the suburbs of Brussels, Paris and Prague."
She added that other value-add opportunities exist in the care home sector in Denmark, logistics and retail (parks) in Poland and Sweden, prime high street refurbishment in Milan and Oslo, hospitality in Greece and student housing in Amsterdam.
"Another interesting value-add opportunity we have identified is the (re)development in cities with strong urbanisation, hubs of innovation and brainpower such as Lisbon, London, Paris, Amsterdam, Berlin, Bucharest, Frankfurt, Barcelona, Copenhagen, Stockholm and Dublin."
According to Savills, real estate remains an asset class of choice in Europe, and the amount of capital invested remains significant. The spread between the average 10-year bond yield and the prime office yield rose to 248bp in second quarter compared to 180bp in 2008 – amid the great financial crisis - and was even above its 10-year average of 237bp.
In strong markets, the number of underbidders for large deals exceeding €500m generally ranges between three and five. For smaller investments up to €100m, it generally ranges between 10 and 15. Some European markets also recently witnessed an increasing number of off-market deals, revealing sellers’ confidence in finding the right offer.