With fewer than one-in-three EMEA countries anticipating further softening over the next 6 months, yields appear to have stabilized. In Western Europe, prime office yields have settled between 5% and 6.5% for the time being, with Austria, Germany and Switzerland all reporting prime yields below 5%. In the Baltic States, Russia and Ukraine, however, prime yields remain at 10% or higher.
With EMEA investment volume at a 2-year low in 2009 H1 (some 60% lower than in 2008 H1), two thirds of the countries surveyed expect to see higher volume in 2009 H2.
The limited availability of loans, together with the strict requirements of those banks that are lending, continues to impact on the speed of recovery. "Colliers figures from across the EMEA region show that loan-to-value ratios are below 60% on average, compared to a high of 80% or more in 2007", notes Kate Lawler, Colliers EMEA Regional Research Coordinator.
Private investors are the most visible players throughout the region, while institutional investors are picking their targets with considerable care. With the exception of Central London, where the current year has so far seen 91 deals with 80 different buyers from around the world, there is a continuing trend towards local rather than international transactions, with domestic investors accounting for the majority of activity in many countries.
Things may be changing, though. "Austrian, British, Dutch and especially German investors are becoming increasingly international in their acquisitions. These investors account for a large proportion of activity in central and eastern Europe," notes Jos Schüssel, CEO of Colliers Netherlands and Joint-Leader of Colliers EMEA's Investment Business Team. "Investors from USA, Canada, and Asia Pacific are expected to re-enter the market in the next year. Additionally, with new regulations allowing Chinese companies to invest direct in commercial real estate, we anticipate increasing interest from this part of the world, specifically in trophy assets."
With positive economic news now more frequent, not least the reported emergence from recession of the economies of France, Germany and UK, commercial real estate is regaining favour as a strong investment opportunity. However, the predicted increase in investment activity across the region as a whole is expected to be slow rather than dramatic and to reveal some continuing exceptions to the general rule.