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European investment market outlook slow, analysts say

A survey by the European Association for Investors in Non-Listed Real Estate Vehicles, found that valuations and financing issues are creating continued uncertainty in the sector.

Some 94% of the fund managers and investors are looking at a slow recovery but they expect the market to have improved in five years time.

It also shows that non-listed fund are trailing other real estate markets.
‘What we see is a difference in the rebound between the different real estate asset types. Listed real estate is already experiencing considerable capital inflows and the same applies for direct real estate,’ said Lisette van Doorn, INREV chief executive.

‘Non-listed property funds are trailing the other real estate types in the property cycle.

However, investors are considering commitments into non-listed property funds as there a considerable number of new fund launches and existing fund investment opportunities in due diligence.

This may indicate that investors are anticipating opportunities to emerge for non-listed funds not too far in the future,’ she added.

Meanwhile, a new report from international real estate advisor Savills shows that investment activity increased four-fold in Brussels during the third quarter of the year compared with the previous three months.

Foreign buyers, in particular German funds, re-entered the market but domestic investors are still the majority.

But transactions are still down 62% year on year and the immediate outlook is mixed.

‘Although some key deals this quarter should re-ignite confidence in the investment market, the lack of prime assets could see some keen players competing, which could even cause some yield compression in the top-tier market.

However, overall market conditions will not improve much more until 2010,’ said Sheelam Chadha, head of research for Savills Belux.

Savills reports that office take-up declined by 51% compared to the third quarter of 2008, vacancy rates increased to 11.5% due to weak demand and prime rents were down 5.45%.

Nevertheless Savills says some tenants are still finding difficulty securing high quality space in key locations.