Preservation of assets and the promise of saleability in times of crisis are currently the chief prerequisites for investments in European office real estate, according to the latest research from IVG.
It is an investment profile that almost unanimously reflects the rather pessimistic outlook of most investors in regard to future economic growth in Europe, and that divides the European investment map into two distinct camps.
Office markets in Germany, the United Kingdom, and Luxembourg are considered economically robust and report stable or falling yield rates as a result, whereas the predicament of countries plagued by massive letting issues such as Spain, Portugal, Belgium, and increasingly France, too, is mirrored in rising yield rates and comparative lack of appeal to investors. This is the upshot of the 10th IVG Market Report 'European Office Real Estate Markets 2012' that was published today.
"As a matter of fact, this is the first time in Europe that such an enormous sum in investment capital has been matched by such modest product availability; that the selection of suitable investment assets and locations has played such a great role for investors; that so many commitments were confined to such a small number of square kilometers in the ever same investment locations; and that so many investors focused on so-called 'core properties'," summarized Dr. Thomas Beyerle, Head of Research at IVG Immobilien AG.
This virtually 'synchronous' investor behavior is highlighted by the IVG Investment Scoring for 81 office locations in Europe. Office markets in Germany, particularly those in Munich, Hamburg and Berlin, report the brightest perspectives for top assets in the prime locations in a two year outlook, with Stockholm and Warsaw next in line.
These markets are defined by a large stock of office space, a comparatively high market transparency and liquidity, as well as by a relatively moderate vacancy rate. Munich and Hamburg also rank high on the cross-European list because their office markets are deemed relatively stable, and because they suggest upward potential in the form of rising rent rates that are buoyed by a booming economy.
The list of European growth winners is headed by Moscow because of the city's enormous growth dynamic and its market potential, ahead of Warsaw and Istanbul. The gravest threats of a downtrend currently manifest themselves in Athens, Lisbon, Madrid, and Milan. Bringing up the rear of the Investment Scoring are Athens, Cork, Naples, and Porto.
With a view to the unclear constellation on the European financial markets, the IVG researchers recommend a selective approach not just when choosing a location but also when picking the micro-location and a given property. "Even and especially in times like these, great opportunities will always present themselves along with the hazards to investors with lower risk aversion and plenty of patience," Beyerle added in closing.