European governments are selling property assets to ease public debt burdens,
according to a new report. Meanwhile, data published today shows that a
fall in public sector activity pushed down UK commercial development in June.
A number of European
governments, including the UK, Germany, France and Greece, are preparing to
accelerate efforts to sell public property more actively and on a larger scale
as a measure to raise funds. Government-owned property sales in Europe reached
€840 million in 2009, and has totalled between 2% to 2.5% of all European public
sales annually over the past four years. This figure could well increase this
year, according to
the new report by property consultants CB Richard Ellis (CBRE).
Marie Hunt, Director of Research at CBRE, Ireland said: “Although the Irish
Government have yet to make any announcement regarding selling any of their
property assets, several European governments are looking to secure real estate
disposals on a large scale. The volume of these asset sales is likely to
increase in the coming year or so, as governments look for ways to shore up
public finances. The average deal size of last year’s government asset
transactions was generally quite small, averaging €10 million. It is likely to
be a similar story this year as buyers avoid larger buildings that carry vacancy
risk, but we expect the practice to be more widespread.
“The market’s appetite for government-disposed buildings will vary depending on
the reason for the sale and the type of asset. Investor demand is likely to be
strongest for prime assets such as offices that governments will sell but
continue to occupy, generating long government-backed income streams.
Prospective buyers for these types of assets would include institutions such as
local and overseas pension funds, insurance companies and German Open-ended
Funds. Surplus buildings in poorer locations and with possible vacancy risk will
attract less interest from buyers.”
The UK government has announced its intentions to sell around £35bn of
public sector assets over the next 10 years, with properties expected to include
student housing and infrastructure. In Germany, the government is continuing its
long-standing commitment to public sector and residential sales at a more local
level. Germany made up 42% of European public sector sales last year and its
contribution to the European total has averaged 30% over the past four years.
The target of BIMA (Bundesanstalt fur Immobilienaufgaben), the German company
responsible for the disposal of state-owned properties, is to sell off around
half of the €6.8bn portfolio of properties within the next five years. France,
Italy and the Netherlands each accounted for 10% or more of all European public
sector sales in 2009, such that in total, the four largest contributing
countries accounted for nearly 80% of last year’s activity in the region.
Meanwhile, the Savills Total Commercial Development Activity Index,
produced by Markit, - - which is
a net balance monitoring the overall performance of the UK commercial property
sector - - posted -2.8% in June, down from +4.1% in May and the lowest for eleven
months. The net balance on average in Q2 was +1.8%.
Commenting on the June survey, Michael Pillow,
Head of Building Consultancy at Savills said: "Public sector austerity
measures are now firmly impacting on the development market, with development
activity for public sector clients now in double-dip territory. Thankfully the
slack is being taken up by continuing growth in the private sector."
|UK commercial property Source: Markit |