Whilst 77% of this investment turnover was recorded in the core markets of the UK, Germany and France, some peripheral markets have shown significant growth, most notably f Greece up 1011%, Ireland up 210% and Italy up 138%.
The bulletin also shows that volumes increased by 43% in the UK, by 28% in Poland and by 20% in Germany, the strongest year on year increases in transactional volumes.
It points out that the spectacular growth in Greece, a ten fold rise in transaction volume at €900 million, was the result of the privatisation of the sale of public assets.
Going forward in 2014 Savills expects to see double digit growth in the investment volumes in Ireland with an increase of around 32% predicted, while Sweden could see 30% growth and France 24%.
Double digit growth is also expected in Spain, around 19%, as a result of ongoing interest in this market with investors believing that prices have bottomed out.
The international real estate advisor notes that cross border investors are playing an important role in the recovery of peripheral investment markets. These buyers are predominantly opportunistic funds looking for higher yields.
In Spain, the share of cross border investment has risen significantly from 36% in 2012 to 78% in 2013 and similarly in Italy the share has increased from 64% to 79% over the same period. Together with Poland, at 91%, Spain and Italy have the highest share of cross border investment of all countries surveyed in this report. In the core markets, domestic investors continued to dominate with shares ranging from 67% in France and Germany to 88% in Sweden.
‘Overseas investors are driving activity in many European markets. Non-European buyers have increased their share of the region’s investment volume to almost 30%, up from 25% in 2012,’ said Marcus Lemli, head of Savills European investment.
‘This can be attributed to the investment preferences of global buyers currently active in Europe. For example US investment, the largest global source of cross border money, comes largely in the form of private equity funds who tend to prefer large portfolio acquisitions,’ he explained.
‘Sovereign wealth funds from the Middle East and Asia Pacific, who are the other main group of global players currently active in Europe, usually go for investments of at least €200 million,’ he added.
In terms of sectors the report observes that all asset types saw a year on year increase in transaction volume in 2013 with the industrial sector recording the most pronounced rise at 27%. The office sector continues to dominate overall investment share accounting for 47% of the total transaction volume on average across the surveyed area, a slight decrease compared with 2012, at 51% as the market becomes more balanced.
Looking at yields Savills finds that prime CBD office yields in London, Paris and the top six German markets have returned to 2007 levels, at 4.2% on average in these markets at the close of 2013. In comparison, across the entire region surveyed in the report, prime CBD office yields averaged 5.2% in the fourth quarter of 2013, a contraction of 19bps on the same quarter in 2012 reflecting a yield compression for the sixth consecutive quarter.
‘The polarisation between core and periphery yields persists. Going forward we expect prime yields will stay stable across most sectors and markets with some notable exceptions. For example, further hardening of all yields is expected in Germany, perceived as a safe haven by investors, and also in Ireland which is firmly on the radar for global investors. We may also see some yield hardening in Spain,’ said Julia Maurer of Savills European research.
According to the research prime shopping yields averaged 5.8% in the fourth quarter of 2013, against 6% in the same quarter of 2012 whilst prime industrial yields are currently recorded at 7.4% compared with 7.7% in the same period the previous year.
The firm expects prime industrial yields to contract in half of the surveyed markets as the sector becomes a more established investment class. This is mainly due to the growth of ecommerce and the entry of some major US and UK institutional players into mainland European markets.
