Investor sentiment in Europe improves significantly with subsiding fears of eurozone break-up

Investor sentiment in Europe improves significantly with subsiding fears of eurozone break-up

Cannes, 13 March 2013 – According to CBRE’s latest Real Estate Investor Intentions’ Survey, launched today at MIPIM 2013, the property industry’s annual trade show, Warsaw ranks in the top 5 destinations, which real estate investors plan to target in 2013. Experts from CBRE, the world’s largest commercial real estate services company, believe this is underpinned by Poland’s relatively favourable economic performance to date and its positive outlook. Investor optimism regarding European markets is reflected by a significant majority of those surveyed, 58% of whom say they expect their purchases in 2013 to be higher than in 2012. Only 45% gave the same answer last year.

Germany was found to be the most attractive market for investment in Europe for more than a third of investors (35%). Overall Western Europe ranked as the preferred destination for investors with 43% of the votes, Asia and North America came second with 18% votes each, while Central and Eastern European (CEE) markets were chosen by 14% of investors (compared with 19% last year). The majority of investors choosing the CEE region consider Poland to be the most attractive destination for purchases (10% of all those surveyed) and show limited interest in other markets in the region. Poland’s results exceed the number of votes given to France, Spain or Nordic countries.

Mike Atwell, Head of CEE Capital Markets at CBRE in Poland:
“While London stands out as the single most attractive city for the second consecutive year, with Munich, Berlin and Paris moving up in the ranks, Warsaw remains CEE’s go-to destination for commercial property investors. Investor intentions for 2013 are influenced by perceptions of market risk and the relative strength of economic fundamentals in different parts of Europe. That is why Northern Europe, notably Germany, the UK (predominantly London) and Poland continue to be seen as promising destinations and continue to attract funds.”

As in the 2012 survey, London was named the top target city for investors in Europe, with 31% of the vote. London’s attraction is due in large part to the size and liquidity of its investment market, and its perception as a ‘safe haven’ by international capital. Since last year the overall popularity of German cities has increased significantly, in tandem with the strength of the German economy. Four of them appear in the top ten choices for investment with Munich in second place (16%) followed by Berlin, with Hamburg and Frankfurt also featured. Together Teutonic cities have collected 34% of the vote. Paris closely follows Berlin in the city ranking, with 9% of the total vote, with Warsaw in fifth place with 7%. Investors remain cautious towards southern European markets, however Spain is beginning to attract some interest. Dublin’s commercial property market is also emerging amid rising confidence that Ireland’s economy is displaying clearer signs of recovery potential.

With recession becoming reality in much of Europe, it is seen as the biggest threat to market recovery by almost half of investors (47%). The eurozone break-up was selected as the biggest threat by only 9% of respondents this year, down from 24% in 2012. Concern over debt availability as a threat to recovery was cited by 14% of respondents, half as many as last year. This marks a shift in comparison to the 2012 survey, when the three biggest threats to a recovery of the European property market were, in the following order, the inability of investors to source new debt, economic recession and a break-up of the eurozone.

Peter Damesick, Chairman, EMEA Research, CBRE commented:

“While recession is a key concern, fears of a euro break-up have subsided and the overall impact of the eurozone crisis on investment activity appears to have lessened. Despite a difficult economic backdrop, there is evidence of improved sentiment among European real estate investors compared to the mood a year ago. It remains to be seen if this might be dented by new uncertainties following the Italian election result but the survey findings fit it with several emerging trends in the market over recent months. These include signs of increased liquidity overall and more transactions in non-prime property and in certain peripheral European markets. These trends are set to continue and potentially gather pace during 2013.”

The 2013 survey also revealed some shifts in investor preferences between different sectors of the real estate market. As in 2012, offices were the single most preferred sector for purchases, chosen by 29% of investors. There is a marked rise in the popularity of logistics property among investors this year with 20% selecting the sector as the most attractive for purchases compared with 14% in 2012. In contrast, investors appeared more cautious towards retail property this year, with lower proportions of investors selecting shopping centres or retail warehouses as the most attractive sectors compared with the 2012 survey.

Przemysław Felicki, Associate Director, CEE Capital Markets at CBRE in Poland, said:
“Investors are very selective and diligent when it comes to retail. There are a lot of factors which have an impact on the performance of a retail asset and an in-depth analysis are required to fully understand the market position of a centre and its future potential, especially that sometimes the basic statistics regarding a city or a particular project can be misleading. In addition, a lot is being said recently about ecommerce or mobile commerce and its influence on traditional retail. Nonetheless, there is still strong demand for both prime, core shopping centres and value-added retail projects, which allow for asset management initiatives and value increase. We should see few major retail assets or portfolios being traded this year in the CEE region, primarily in Poland.”