Yields stabilising and even the occupational market managing to show some encouraging signs of approaching stability has led to much improved sentiment especially in the German and French markets, according to the latest European commercial property investment update from Cushman & Wakefield.
As in the second quarter, increased activity has been driven by cross-border investment, which more than doubled on the previous quarter and stood at its highest for over a year, the report shows.
International investors increased their share of activity to 44%, up from 31% in the first six months of the year.
Domestic investors, although more cautious, were also increasingly active, with €10.9 billion in investment, some 29% up on the second quarter.
‘There are still plenty of problems for the market to deal with but with two quarters of growth in activity and much improved sentiment, it’s clear we’ve turned an important corner,’ said David Hutchings, head of the European Research Group at Cushman & Wakefield.
‘With yields stabilising at levels which are clearly attractive for long-term equity buyers, a growing number believe that now is the time to act even if the occupier market has not yet hit bottom,’ he added.
The problem for investors is finding enough stock, with banks still generally supportive of their loans and some vendors holding back hoping that pricing will improve.
But the report predicts a busy final quarter, with trading volumes for the year expected to be around €65 billion.
In Central and Eastern European performance is increasingly diverse with yields holding firm in Poland, the Czech Republic and Russia, but moving out further in Bulgaria, Romania and Hungary.
‘Investors are clearly still very focused on prime, secure income producing assets with limited interest for anything else.
The bigger, more liquid Western markets are leading, with the UK very busy but France also enjoying better international demand and Germany seeing good interest from local buyers,’ said Michael Rhydderch, head of the European Cross Border Capital Market Group at Cushman & Wakefield.
‘Elsewhere investors are looking for distress and hence markets which have fallen a long way are being re-examined.
Spain had a good quarter, as did core markets such as Belgium and the Netherlands.
In other areas the picture is more mixed, with an increasingly polarised market in terms of activity and performance,’ he added.
But he concluded that 2010 could well be frustrating. ‘In some areas a fall in yields will bring additional stock onto the market and support the rebound in trading volumes.
What is not in doubt is property’s appeal in terms of income and its perception as a valid inflation hedge,’ he added.
