Click here to close now.

SYS-CON MEDIA Authors: Pat Romanski, Elizabeth White, Liz McMillan, Carmen Gonzalez, Plutora Blog

News Feed Item

Investors Turn To Recovering Markets, Regional Cities And Secondary Property As The Competition For Prime European Real Estate Assets Increases

-- Investors see buying opportunities in Ireland and Spain according to new Emerging Trends in Real Estate® Europe 2014 Report published by Urban Land Institute (ULI) and PwC

LONDON, Jan. 16, 2014 /PRNewswire/ -- The competition for prime assets in Europe's major real estate markets is leading investors to turn to recovering markets such as Ireland and Spain, regional cities and secondary property in search of returns, according to Emerging Trends in Real Estate® Europe 2014, a forecast published jointly by the Urban Land Institute (ULI) and PwC.

(Logo: http://photos.prnewswire.com/prnh/20100310/ULILOGO)

Emerging Trends in Real Estate® Europe 2014 finds that 71% of respondents think that a shortage of suitable assets for acquisition will have a moderate or significant impact on their business during 2014. As a result of this increasing competition, 59% per cent of respondents believe that prime property in Europe's core markets has now become over-priced.

The report highlights that investors are becoming increasingly comfortable with taking more risk in search of returns. One of the biggest beneficiaries of this is Dublin, which has risen dramatically in the city investment rankings, moving up from 20th in last year's report to second in 2014. 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 Ireland.

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 €162 million 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.

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 prime property.

"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."

Simon Hardwick, real estate partner at PwC Legal, said "We believe the real estate investment market in 2014 will be dominated by a battle for assets. International capital will continue to flow into Europe, seeking to acquire prime assets in core locations. Intense competition for the limited supply of suitable property will inevitably continue to have an impact on prices – particularly in global gateway cities, including London. This will result in investors having to look at other opportunities and to accept more risk. This is reflected in the renewed interest in development, as well as the fast improving outlook for "non-prime" locations and properties. However, we are sceptical about whether the positive sentiment will lead to a headlong rush into the most risky markets. Investors' interest remains focused primarily on sustainable returns from quality assets in good locations."

The report highlights that there will be significant capital available in Europe's real estate markets during 2014 with 71% of respondents believing there will be an increase in equity for refinancing or new investment this year. Although some of the equity will be domestic, significant investment is expected to continue to flow from sovereign wealth funds, especially those based in Asia. Nearly 80% of respondents believe that capital from Asia Pacific will increase during 2014, with 67% of respondents believing that capital from The Americas will increase this year.

The outlook for real estate debt availability is also improving, with 51% of respondents expecting the availability of debt for refinancing or new investment will increase this year, with only 15% of respondents expecting it to become more scarce. However, respondents were not expecting dramatic improvements to pre-recession levels and there remain significant geographical differences in perspective. The UK was the most upbeat on the prospects for debt with nearly 90% expecting greater availability, while southern European and Benelux countries were more cautious on the outlook.

Top Investment Markets for 2014

The top five European real estate investment markets in 2014 are predicted to be:

1. Munich – The city continues to benefit from Germany's position as the economic powerhouse of Europe and from a young, expanding population. The city remains popular with core investors who are attracted by low unemployment and a lack of high quality office buildings. Munich also has a busy retail market and a strong serviced-based economy. Munich is rated first for existing investment prospects and second for development prospects but the outlook for new investments has fallen to seventh. The report believes this is likely to be down to many investors seeing the city's office market as too expensive.

2. DublinDublin is the biggest winner in this year's 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. However, opportunities for investment will be limited due to the size of the market. Office prices have increased significantly over the past 12–18 months in prime locations such as the docklands, and local investors are predicting a further rise of 10% in 2014. Survey respondents highlighted there was significantly more equity available and that bank debt was becoming available again for the right assets and investors. The residential market is also recovering, with prices for well-located properties rising over 20 % last year, however, retail is still under pressure, with rents continuing to fall, albeit at a slower pace.

3. HamburgHamburg's diversified economic base helps sustain a steady level of office demand and there is considerable competition for core offices among investors, with yields now around 4.7%. Residential also has long-term momentum due to the city's relatively high population growth, boosted by inward migration, and rents have risen an average of 5.7% annually since 2007, but have now started to plateau. The growing population, combined with an above average level of disposable income and 10.6 million hotel reservations each year made by both tourist and business travellers, provides Hamburg with strong retail fundamentals. Limited new retail development has meant that supply of prime space is now tight. HafenCity, Hamburg's gigantic redevelopment of its former port, is midway through creating an entirely new quarter that will double the population of the city centre. Due to be finished in 2025, it will also make Hamburg one of the most sustainable cities in Europe.

4. Berlin Berlin's young population and its growing influence as a European media and technology hub, continue to make it an investment hotspot. Prospects for the residential sector are strong and rents in the city have been rising steadily, especially in recently modernised buildings. House prices in certain areas of the city have also doubled over the past year. Berlin's office market is enjoying a mini-boom and is on most core investors' target lists. The city's economy and tenant base has become more diverse and the demand for office space is set to grow as companies seek to expand. The retail sector is also experiencing good demand, with rents growing sharply in prime locations.

5. London - London's reputation as a safe haven for international capital means that it remains a firm favourite with investors seeking core and core-plus assets. Large amounts of sovereign capital from Asia and the Middle East are continuing to flow into the city and very few deals or assets are now seen as un-fundable. However, this popularity has led to price inflation and there is concern that there is now a bubble developing. Many respondents believed that London was fairly fully priced and as a result investors would look to other UK regions in search of returns or buy secondary assets which they can turn into core investments. Central London's buoyant prime residential market is also attracting significant interest. The sector has not traditionally attracted institutional capital, but this is changing and both UK and international investors are tentatively starting to develop and refurbish property, both for sale and rental.

Top 10 European Cities for Existing Property Investments


2014 Ranking

2013 Ranking

Change

1

Munich

1

0

2

Dublin

20

+18

3

Hamburg

5

+2

4

Berlin

2

-2

5

London

3

-2

6

Zurich

7

+1

7

Istanbul

4

-3

8

Copenhagen

12

+4

9

Stockholm

8

-1

10

Frankfurt

11

+1

Emerging Trends in Real Estate® Europe
Emerging Trends in Real Estate® Europe is a joint report published annually since 2003 by the Urban Land Institute (ULI) and Pricewaterhouse Cooper (PwC). The report provides an outlook on European real estate investment and development trends, real estate finance and capital markets, as well as trends by property sector and geographical area. It is based on the opinions of more than 500 internationally renowned real estate professionals, including investors, developers, lenders, agents and consultants.

About the Urban Land Institute
The Urban Land Institute (www.uli.org) is a global non-profit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has nearly 30,000 members representing all aspects of land use and development disciplines.

About PwC
PwC helps organisations and individuals create the value they're looking for. We're a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
After a couple of false starts, cloud-based desktop solutions are picking up steam, driven by trends such as BYOD and pervasive high-speed connectivity. In his session at 15th Cloud Expo, Seth Bostock, CEO of IndependenceIT, cut through the hype and the acronyms, and discussed the emergence of full-featured cloud workspaces that do for the desktop what cloud infrastructure did for the server. He also discussed VDI vs DaaS, implementation strategies and evaluation criteria.
The emergence of cloud computing and Big Data warrants a greater role for the PMO to successfully manage enterprise transformation driven by these powerful trends. As the adoption of cloud-based services continues to grow, a governance model is needed to orchestrate enterprise cloud implementations and harness the power of Big Data analytics. In his session at Cloud Expo, Mahesh Singh, President of BigData, Inc., discussed how the Enterprise PMO takes center stage not only in developing the app...
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happe...
We certainly live in interesting technological times. And no more interesting than the current competing IoT standards for connectivity. Various standards bodies, approaches, and ecosystems are vying for mindshare and positioning for a competitive edge. It is clear that when the dust settles, we will have new protocols, evolved protocols, that will change the way we interact with devices and infrastructure. We will also have evolved web protocols, like HTTP/2, that will be changing the very core...
Connected devices and the Internet of Things are getting significant momentum in 2014. In his session at Internet of @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, examined three key elements that together will drive mass adoption of the IoT before the end of 2015. The first element is the recent advent of robust open source protocols (like AllJoyn and WebRTC) that facilitate M2M communication. The second is broad availability of flexible, cost-effective ...
Collecting data in the field and configuring multitudes of unique devices is a time-consuming, labor-intensive process that can stretch IT resources. Horan & Bird [H&B], Australia’s fifth-largest Solar Panel Installer, wanted to automate sensor data collection and monitoring from its solar panels and integrate the data with its business and marketing systems. After data was collected and structured, two major areas needed to be addressed: improving developer workflows and extending access to a b...
When an enterprise builds a hybrid IaaS cloud connecting its data center to one or more public clouds, security is often a major topic along with the other challenges involved. Security is closely intertwined with the networking choices made for the hybrid cloud. Traditional networking approaches for building a hybrid cloud try to kludge together the enterprise infrastructure with the public cloud. Consequently this approach requires risky, deep "surgery" including changes to firewalls, subnets...
Containers Expo Blog covers the world of containers, as this lightweight alternative to virtual machines enables developers to work with identical dev environments and stacks. Containers Expo Blog offers top articles, news stories, and blog posts from the world's well-known experts and guarantees better exposure for its authors than any other publication. Bookmark Containers Expo Blog ▸ Here Follow new article posts on Twitter at @ContainersExpo
The true value of the Internet of Things (IoT) lies not just in the data, but through the services that protect the data, perform the analysis and present findings in a usable way. With many IoT elements rooted in traditional IT components, Big Data and IoT isn’t just a play for enterprise. In fact, the IoT presents SMBs with the prospect of launching entirely new activities and exploring innovative areas. CompTIA research identifies several areas where IoT is expected to have the greatest impac...
There is little doubt that Big Data solutions will have an increasing role in the Enterprise IT mainstream over time. 8th International Big Data Expo, co-located with 17th International Cloud Expo - to be held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA - has announced its Call for Papers is open. As advanced data storage, access and analytics technologies aimed at handling high-volume and/or fast moving data all move center stage, aided by the cloud computing bo...
The 4th International Internet of @ThingsExpo, co-located with the 17th International Cloud Expo - to be held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA - announces that its Call for Papers is open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
The 5th International DevOps Summit, co-located with 17th International Cloud Expo – being held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA – announces that its Call for Papers is open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the...
You use an agile process; your goal is to make your organization more agile. But what about your data infrastructure? The truth is, today's databases are anything but agile - they are effectively static repositories that are cumbersome to work with, difficult to change, and cannot keep pace with application demands. Performance suffers as a result, and it takes far longer than it should to deliver new features and capabilities needed to make your organization competitive. As your application an...
Move from reactive to proactive cloud management in a heterogeneous cloud infrastructure. In his session at 16th Cloud Expo, Manoj Khabe, Innovative Solution-Focused Transformation Leader at Vicom Computer Services, Inc., will show how to replace a help desk-centric approach with an ITIL-based service model and service-centric CMDB that’s tightly integrated with an event and incident management platform. Learn how to expand the scope of operations management to service management. He will al...
Over the years, a variety of methodologies have emerged in order to overcome the challenges related to project constraints. The successful use of each methodology seems highly context-dependent. However, communication seems to be the common denominator of the many challenges that project management methodologies intend to resolve. In this respect, Information and Communication Technologies (ICTs) can be viewed as powerful tools for managing projects. Few research papers have focused on the way...