Savills has revealed its top 10 European hot spots as investors divide into security hunters and risk takers. The international real estate advisor has analysed leasing trends and prospects, the state of the development pipeline and investment pricing to reach its recommendations for 2010 and 2011.
Giles Wilcox, Savills' Head of European Cross Border Investment, says: "2010 is differentiating itself already from 2009 with investors slowly but surely looking higher up the risk curve, as rentals in certain prime sectors start to stabilize and quality stock remains scarce. Buyers are polarized between the risk averse and the risk embracers, with development again on the agenda. Timing will be everything!"
Risk averse
- London CBD offices - Vacancy rates have fallen from 15.6% to 13.5% in the City, and 6.7% to 6.5% West End. With no new developments due to complete in 2010 and 2011, the London office market is on the road to firm recovery.
- Paris CBD offices - Prime rents are forecast to grow by 8% in 2010 due to a lack of quality supply.
- German regional city retail - Rents grew by as much as 11% in the final quarter of 2009 reflecting a stabilization in consumer spending, which is set to continue.
- Pan-European shopping centers - Vacancy rates stayed low in 2009 and with an overall prime shopping center rental growth of 1% in Q409 investors are set to cease retail opportunities.
- Swedish prime offices and retail - GDP is forecast to grow by 2.3% this year and household spending by 1.9%, providing a positive focus for those fixed on a stable economy.
Risk embracers
- Warsaw offices - Vacancy rates have fallen from 7.8% to 7.2% and rental growth prospects are set to be positive over the next few years.
- Madrid offices - Despite being associated with the 'PIIGS', Madrid's office market has remained a focus for domestic buyers and its restrained development pipeline from 2011 will encourage international investors for larger transactions.
- Italian retail - A recovery in consumer spending is forecast for 2010/2011 and with retail rents remaining stable, Italy will be an area of opportunity.
- Speculative development in Tier 1 cities - Undersupply is imminent in some of Europe's major cities following record low levels of speculative development finance. Those with access to finance will be looking to exploit the very low levels of development completions 2011-2014.
- Paris La Defense & London non-CBD office markets - These fringe markets have seen less aggressive yield movement than core but with a shortage of Grade A space in the CBD markets occupiers will be refocusing on the fringe.
Source: Savills
