– Germany most popular European country for second consecutive year
– Nordics climb the rankings at city and country level Berlin shows the biggest increase, jumping to second place from fourth in 2016
– Dublin in the Top 15 EMEA cities being targeted by international investors
London, 15 March 2017 – London has been ranked as the most attractive European city for real estate investment for the sixth consecutive year, according to CBRE’s annual Investor Intentions Survey being launched at MIPIM 2017. Seventeen per cent of respondents cited London as their preferred destination for real estate investment. Dublin remains in the Top 15 EMEA cities being targeted by international investors having seen more than three quarters of investment spend in 2016 emanating from non-domestic investors. 31% of Irish investment spend in 2016 was classified as European with 24% emanating from the US and more than 10% coming from the UK.
Berlin has jumped to second place in 2017 from fourth in 2016, whilst Hamburg, Milan and Munich dropped out of the top 10. Paris ranked as the fifth most attractive city in Europe, failing to make the top three for the first time since 2014. Meanwhile Oslo and Stockholm were prominent new entries in the top 10 most attractive investment cities, reaffirming the strong investor interest in the Nordics.
Fifteen most attractive cities for investment in EMEA
London 17%
Berlin 15.8%
Madrid 8.4%
Amsterdam 7.3%
Paris 5.4%
Warsaw 4.9%
Oslo 4.7%
Prague 3.0%
Stockholm 2.9%
Frankfurt 2.6%
Budapest 2.6%
Munich 2.6%
Milan 2.5%
Dublin 2.3%
Bucharest 2.3%
Whilst London was ranked the most attractive city, Germany has retained the top spot as the most attractive country for real estate investment in EMEA, preferred by 22% of respondents in the CBRE survey. The UK (20%) was once again the second most popular country and both Germany and the UK have increased in popularity from the previous year, up from 17% and 15% respectively in 2016. Investors value their relatively high liquidity and transparency.
Investors also continue to show a greater desire to acquire property than dispose of it. According to the survey, 85% of investors intended to spend at least as much in 2017 as in 2016 and 41% expected to spend more. Investment style is also shifting. There is now a lower preference for core stock with investors showing a greater propensity (41%) to invest in good secondary or value–add opportunities. Whilst this differed between markets, it reflects a desire for assets where active management can be used to enhance returns in a growing economic environment where yields are compressed and interest rates are likely to rise.
Offices remain the most attractive sector in 2017, although its lead over other sectors is contracting. Investors now perceive industrial and logistics as the second most attractive sector, motivated by structural changes such as the broad-based integration of e-commerce in the supply chain and the development of logistics as an institutional investment product. This is also borne out in the Irish market where rental growth is expected to be strongest in the logistics sector in 2017.
The survey also highlighted the increasing attraction of alternative investment sectors, with 71% of respondents indicating that they had already invested in alternatives whilst 64% are actively pursuing opportunities in the sector – another trend that is becoming increasingly evident in the Irish market.
While 2017 will be an eventful year, with several major elections in Europe, investors’ focus appears to be more concentrated on the economic climate rather than geo-political events. The most frequently cited risk for 2017 was “faster than expected interest rate rises”. In terms of the immediate challenges impacting the acquisition of real estate assets, availability of product and pricing of assets were considered the greatest obstacles facing investors this year.
Jos Tromp, Head of EMEA research at CBRE comments: “The spread between property yields and bond yields remains close to historic highs and is consequently one of the primary motivators in attracting investors to the sector. However, in an environment of continued economic and political uncertainty, the defensive characteristics, capital value growth and attractive income profile of real estate remain important drivers of continued investor interest in the sector.”
Johnny Horgan, Executive Director, Capital Markets at CBRE Ireland adds: “Europe remains a key target for property investors globally and the economic outlook for the European economy remains positive. Whilst the core markets of the UK and Germany remain the largest investment destinations, markets such as the Nordics and CEE are increasingly important components of global investment strategies. Furthermore, cities such as Madrid and Dublin are both ranked within the top fifteen most attractive European investment destinations, highlighting the popularity of Europe’s recovery markets as investors seek value-add investment opportunities.”