In its latest European Market in Minutes international real estate advisor Savills forecasts that European investment activity in 2013 will continue to be driven by equity-rich buyers seeking risk-averse, prime product in markets such as the UK, France, Germany and the Nordics.
This demand will, in turn, keep prime yields in these markets stable with some upward pressure on pricing in key sectors including prime offices, shopping centers and high street retail. Average prime yields in these sectors currently stand at 5.7%, 5.8% and 4.5%, respectively.
Furthermore, in peripheral markets such as Spain and Ireland the firm expects to see more activity from opportunistic investors seeking good quality assets at significantly reduced prices. However, investment volumes in these markets will be heavily dependent on debt markets and economic improvement. Consequently turnover may still be subdued with yields for secondary assets in peripheral markets likely to remain under pressure.
Lydia Brissy, European Research director at Savills, says: "With ongoing economic uncertainties throughout Europe we expect the UK, France and Germany to capture most of the global capital flows in 2013 as investors favor risk-averse assets. Nevertheless, an increasing presence of opportunistic equity funds from North America in Europe could lead to a rising number of cross border investments in peripheral European markets this year."
Savills predicts 2013 will be a crucial year for the retail sector in Europe and expects the prime high street segment to remain the most attractive retail asset class for investors into European markets. This is due to the perception of prime high street retail as a safe investment option that will outperform inflation and hold its capital value in the long term. At 4.5%, the average prime high street investment yield in Europe is at the lowest it has been since the end of 2006.
Lydia Brissy adds: "With consumers restricting their spending and rising competition from online sales, retailers must adapt to the current market and consumer needs such as by increased multi-channeling, developing online sales platforms, offering value for money and convenience."