Welcome to this summary of the key themes from Emerging Trends in Real Estate Europe 2014.
It’s a ‘Good News’ story: our industry – you – are generally feeling much more optimistic. According to our survey of industry leaders across Europe - business will be better this year.
Equity to invest seems plentiful and is expected to continue to grow. Debt is also more easily available. European banks are lending again and our research suggests this trend will continue.
Safety, in the form of high-quality properties in capital cities, is still a priority for much of the capital flowing into Europe from Asia and North America. But there is a limited supply of truly prime properties, so the battle for these assets is fierce and prices may continue to rise – even though almost 60% consider prime assets are already over-priced .
This is pushing the real estate industry to take a bit more risk. There’s a search for yield – and value. Investors are looking further afield, at places and assets that were no-go areas only a year ago. Over 70% of respondents say development is now an attractive way to acquire prime assets.
The change in sentiment is particularly striking around Spain. From being a property pariah that few would touch, it’s turned into a market where foreign investors, expect to find good opportunities in 2014.
Investors are also looking at moving into different asset classes, such as data centres and student accommodation. Interestingly, residential investment is judged to have better prospects in 2014 than core commercial real estate.
A willingness to take a bit more risk also shows up in some of the cities that Emerging Trends ranks as the best bets for investors and developers next year. Munich remains the safe-haven European market that is expected to deliver the best performance for existing investments; it has all the right ingredients – Germany’s strong economy, a diverse economic base, a young and growing population, and a limited supply of high-quality buildings. But Dublin is considered number one for new investments: the Irish economy has turned the corner, and prices are low. And, finally, London tops the league for development; this global gateway is voted Europe’s best bet.
Sustainability is also very much on the agenda, with a majority of respondents saying it is in their business strategy for 2014. More surprisingly, half of our respondents say they achieve higher rents for green buildings. As one interviewee commented “The future really is green”.
So, looking aheadinto 2014, it seems there are many reasons for us to be cheerful. That’s why we’ve called this year’s report “Real Estate Returns”.