|Source: IPD via CBRE
From 67% losses from the late 2007 peak, Ireland
is now one of the 'hottest' hotspots for European commercial property
according to research published Thursday. "With Ireland having seen a flood of
deals," investors are beginning to focus on Spain, the research found.
is the biggest winner in this year's PwC
(PricewaterhouseCoopers) / Urban Land Institute emerging trends' report,
rising 18 places to second for existing investments and 14 places to first
for new investments. Investors believe that 2014 will mark
Dublin's comeback, driven by improving economic
conditions, with unemployment at its lowest level since 2009, and forecasted GDP
growth of 2 % this year.
The report, which includes an investor survey,
says "Dublin's real estate market has been
transformed from a 'no-go' location among investors only two years ago, to being
one of the hottest markets in Europe, with both
domestic and international investors attracted by pricing levels and
Ireland's improving economic outlook. The
report finds that 51% of respondents now see good buying opportunities in
The weight of international capital is leading
investors to also turn to other recovering markets, such as
Spain. The report highlights that 67% of
respondents believe that there are now good buying opportunities in
Spain, with the acquisition of the Parque
Principado mall in Oviedo by Intu and the Canadian Pension Plan Investment Board
for €162m highlighted as an indicator of mainstream interest in the market.
However, sceptics argue that debt is very hard to attain and that it is a risky
market to invest in before there are signs of any growth.
Investors have increased their allocations to
property assets over the past couple of years, as low interest rates and
governments’ quantitative easing programmes create a low-yield environment in
which returns are hard to achieve in many asset classes. As a result there had
been a “huge capital push” into Europe’s biggest real estate markets, said
Simon Hardwick, a partner at PwC.
The competition for core assets has also led to
an increase in investors looking beyond prime assets in major European markets
such as London,
Munich and Paris, and instead buying
solid income producing assets in secondary cities. For example, office investors
in Munich can achieve yields of approximately
4%, but those willing to invest in smaller German markets such as
Stuttgart can achieve up to 6.5%. Investors are
also looking to acquire secondary properties in major markets, which have good
existing income streams or which, with careful asset management, could be
transformed into core assets.
An interesting consequence of the "Battle for
Assets" is that investors are increasingly considering development as a way
of adding high quality assets to their portfolios. The report demonstrates that
71% of respondents believe that development is an attractive way to acquire
"The resurgence of investment in
Ireland and how far the Spanish real estate
market recovers, will be two of the key stories in 2014" commented
Joe Montgomery, chief executive of ULI Europe.
"Investor appetite in Dublin has been growing
over the past 12 months with significant volumes of international capital
chasing the best assets. Investor interest is now moving to
Spain, where there are signs that opportunistic
investors, who entered the market when Sareb opened for business last year, are
now being followed by mainstream institutions. However, with limited signs of
tenant demand and rental growth, questions remain as to how far the market
recovery can go."
Sareb is the Spanish toxic property loans agency.
European commercial property rose to the highest
level in 2007, since 2007, separate data from CBRE show. The data also shows
that activity was up 21% year on the year to €154bn.
said on Tuesday that
96 investment transactions of greater than €1m concluded in the Irish
market during 2013, totalling €1.78bn, compared to 35 transactions
totalling €545m in 2012. Over 50% of the 2013 investment activity
emanated from overseas investors. When loan sales are added, the total volume of
activity in the Irish investment market in 2013 was more than €2.5bn.
The report should be available
here on Thursday.
Chinese investment (ex Hong Kong) in Europe
tripled last year as insurers, developers and private individuals joined the
country’s sovereign wealth funds in seeking to diversify their assets outside
Asia, analysis by research firm Real Capital Analytics (RCA) published
Chinese investors purchased €3.05bn of commercial properties across Europe
last year after they bought €978m of real estate in 2012, according to
data compiled by RCA. The number of buildings acquired, including those that
formed part of portfolio transactions, rose to 43 in 2013 from 10 a year
Joseph Kelly, RCA’s director of Market Analysis EMEA, said: “After an initial
wave of investment by sovereign wealth funds, that was focused on large trophy
assets in London, wealthy individuals, developers and insurers have become
increasingly active across a broader range of property types, lot sizes and
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