Savills has announced its top ten hotspots for investment in Europe, split between five tips for risk taking investors (‘risk embracers’) and five for those who are hunting for secure returns (‘risk avoiders’).
Marcus Lemli, Savills head of European investment, commented: “European commercial real estate remains one of the best places for investors to earn a healthy yield and we anticipate total investment volume to grow between 3 and 5% in 2016. Investors, however, are looking to actively diversify their portfolios and therefore volumes are likely to be less concentrated in a handful of key locations, and spread more evenly across the continent this year. For both the opportunistic and the cautious investor there are multiple opportunities available – often within the same city.”
Risk avoiders:
- Shopping centres in prime cities: dominant shopping centres in cities set to experience strong population growth and attract large numbers of tourists will continue to prove attractive. Berlin, London, Madrid and Milan all fit this criteria.
- Prime green offices in ‘smart cities’: flexible, sustainable buildings in innovative or smart cities, such as Berlin, Dublin, Stockholm, Barcelona, Madrid and Warsaw, will be increasingly attractive to young workforces and occupiers and should therefore see continued rental growth.
- Pan-European e-commerce logistics: e-commerce grew 22% in Europe in 2015, and further innovation in the retail sector will drive continuing demand for warehouses and distribution networks in all large urban areas across Europe, particularly the continent’s largest cities: London, Madrid and Paris.
- Prime high streets in tourist cities: Milan, Paris, Madrid, Amsterdam and London will continue to experience high footfall from overseas visitors. These cities offer a variety of cultural attractions and attract tourists with high disposable incomes, and will therefore remain popular destinations for international retailers.
- Student housing in markets with rising international student numbers: student accommodation in the UK, Germany, France, The Netherlands and Spain has become an established investment asset over the past few years. Pockets of undersupply allow for more space for new developments and additional investment.
Risk embracers:
- Healthcare in France and Germany: Europe’s ageing demography will drive a need for private care homes and facilities, particularly in markets with above-affluent populations such as France and Germany.
- Offices in Central Eastern Europe: as more western companies seek to ‘near shore’ - bring their back-office functions closer to home – lower labour and property costs in locations such as Poland, Hungary, Romania and Slovakia, make these attractive destinations, and therefore potential opportunities for investors.
- Micro-apartments in top and second tier cities: in prime cities, such as London, Paris and Madrid, where younger generations are already being priced out of the housing market, and growing innovation hubs in Berlin, Dublin, Barcelona, Amsterdam and Stockholm, where affordable residential accommodation is set to struggle to keep pace with demand, micro-living developments are set to see increased demand.
- High performing shopping centres in fringe, recovering markets: consumer spending in markets such as Greece, Portugal and Romania was hit by the GFC and their indigenous economic issues, but they are gradually entering a recovery phase. High risk premiums are applied at the moment even on well performing assets.
- Public assets in markets where governments are forming public/private partnerships: in the UK and Sweden, or indebted countries that are privatising, such as Italy and Greece, the inability of the public sector to maintain high quality services or the need to improve liquidity is leading to sales of interesting public assets.
