Investment into European real estate hit a record €253bn in 2017, with yields across the continent reaching historic lows, according to BNP Paribas Real Estate.
Among European cities, London ranked at the top, attracting €22.5bn of capital into property. Meanwhile, Germany’s four major markets – Berlin, Frankfurt, Munich and Hamburg – totalled €24.6bn combined.
Average prime office yields fell 30bps to 4.66% as Berlin’s tightened to just under 3%. Zurich had the lowest yields overall at 2.7%.
Richard Malle, global head of research at BNP Paribas Real Estate, said he expects a strong 2018: “We anticipate that most occupier markets will record favourable trends in vacancy rates, rental values and take-up. Office prime yields will most likely stabilise but average yields will continue to drop because of delay and spread effects.
“For investors, the main challenge will be to find assets that match their acquisition criteria. For 2018, we are expecting original strategies will be created to harvest more performance, by looking for market opportunities such as emerging locations, added-value assets and speculative schemes.”
Record take-up
Total office take-up in the 30 main European cities came to just shy of 140m sq ft – a 12% rise year-on-year, and the highest number in a decade.
Vacancy rates fell to 7.8%, down from 8.5% in 2016 and an all-time low. In London, however, rates were up 50bps to 6.2%.
Manchester had the highest vacancy rates of any major city in Europe at 14.5%.
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