Investors positive about real estate investment in Europe in 2010, survey shows

At a global level some 60% of investors believe that Europe is the top target while the rest opted for elsewhere including most notably Asia, the poll for international real estate consultants CB Richard Ellis Group shows.
 
‘This European preference is probably not surprising given that the vast majority of respondents are based in, and predominantly invest within, the region. However, it is noteworthy that 40% see the best opportunities laying elsewhere, with Asia a clear target for many,’ said Nick Axford, Head of EMEA Research and Consulting at CBRE at a briefing held at MIPIM, the international real estate event held annually in Cannes, France.
 
The UK has undoubtedly led the recovery of both transaction volumes and prime property prices in Europe over the last six months, and it continues to attract significant investor interest, he told the audience.
 
‘The transparency and liquidity of the market, coupled with the rapid adjustment in prices and the weakness of sterling make an attractive combination in a climate in which investors are still risk averse and focused on prime product,’ said colleague Jonathan Hull.
 
‘Any prime properties coming onto the UK market are attracting extremely strong investor interest, especially from overseas. But tenant covenant and lease length are key concerns for investors,’ he added.
 
‘Liquidity risk is also a primary concern and it is therefore not surprising, given the size of the markets and relatively positive recovery prospects, that France or Germany appear most attractive to over a third of respondents, Hull explained.
 
There is a greater flow of capital to major cities beyond London, which is putting pressure on pricing particularly at the prime end of the market and analysts are surprised by the strength of focus on Central East Europe markets where transaction volumes have so far been extremely low over the past 18 months.
 
However, investors see fewer opportunities in the distressed Spanish market. They perhaps believe that the window for entering this market will remain open for longer there than elsewhere in Europe, Hull suggested.
 
The survey also found that 13% believe that shortages of debt finances will pose the greatest risk to recovery this year and the levels of outstanding debt across Europe are a concern. But for new borrowers lending conditions have definitely eased in recent months. ‘Finance is available for the right opportunities when they present themselves,’ said Philip Cropper, Executive Director of Real Estate Finance, CBRE.
 
The one thing that investors seem less worried about at the moment is property pricing. It was mentioned as their main concern by just seven investors in the survey.
 
Almost half of respondents said that the first half of 2010 represented the best buying opportunity for prime real estate, with most of the remainder preferring to wait until the second half of this year.