SAVILLS: EUROPEAN COMMERCIAL REAL ESTATE INVESTMENT VOLUMES FORECAST TO REACH €230BN IN 2019
European commercial real estate investment volumes are forecast to reach €230bn by the end of 2019, meaning more than €200bn will have been invested in European commercial property for the sixth consecutive year, according to international real estate advisor Savills. The forecast is unprecedented in the history of the European investment market and underlines the continent’s status as a safe haven for investment.
Savills says whilst Germany, the UK and France will continue to attract the lion’s share of European investment. Poland, one of the top two CEE markets is also forecast to see commercial investment volumes either stay in line or exceed their respective five-year averages in 2019. Commercial investments in the Czech Republic, second of the top two CEE markets, are going to stay under the five-year averages in 2019.
The US, Singapore and South Korea made up the three largest non-European investor groups in 2018 and are forecast to continue to dominate in 2019. South Koreans, who invested €5.4bn in 2018, up from €4.89 in 2017, have recently broadened their market coverage to countries which weren’t previously their primary focus, notably the Czech Republic, Belgium, Poland, Italy, Denmark and Spain.
Savills highlights that the gap between average European Prime Office CBD yields and 10-year government bonds is wide by historical standards (212 bps in 2018, compared to 185 bps in 2008/2009) and as long as this gap remains, buyers will continue to invest in commercial real estate in an income-led environment. Prague offices witnessed the strongest yield compression of 60 bps to 4.25% in 2018, though this level still remains attractive to the European average and is set to compound further in 2019.
Stuart Jordan, Head of Investment, Savills Czech Republic, says: “Whilst offices will generally continue to be the asset class of choice, industrial and logistics assets across CEE continue to attract increasing investor depth, especially as the rental growth picture in this sector is compelling and long leased product captures a wide investor base where income-led investments are in focus.”
John Palmer, Director, Head of Industrial Investment, Savills Poland, adds: “In CEE investors are now acquiring industrial assets across a wide spectrum of yielding characteristics. These range from multi-tenant logistic parks, with some added value opportunities, to long lease less management intensive income streams.”