Despite the continued uncertainty that surrounds the economies of Europe, real estate is bearing up surprisingly well, if not positively benefiting from investors’ desire to put their money into something tangible and, they hope, resilient.
Research from CBRE indicates that values are holding up. Prime yields have risen in some cases, but not quite as much as one might have expected, given the state of some European economies and the degree of uncertainty in all of them.
CBRE’s observations of property yields’ strength seem to be confirmed by the continued and sometimes, it seems, almost frenzied demand for property in non-euro territories including the UK, Sweden and parts of CEE, as well as Germany in euroland.
Going forward, the wild card is, of course, any potential breakup of the eurozone and the extent to which this will exacerbate the nascent recessions that lurk in many of Europe’s economies.
As with any such complex scenario, there are a range of views on how it will pan out. While one German investor whom we spoke to this week said that his company’s “house view” is that the eurozone will not be broken up, a conversation with a Europe-based US investor revealed that his company is treating collapse of the eurozone as a foregone conclusion.
If the premise behind defensively taking stakes in prime real estate in less vulnerable markets is that any reduction in the amount of space which companies want to occupy will affect the best property last, then the keyword is “prime”: there’s little investor interest in anything else, after all.
But Italian investor Sorgente Group is taking no chances and is going one better than that. The company is pursuing only “trophy” assets on behalf of its Italian pension fund clients, eager, evidently, to hedge against any possibility of a eurosplit.
paul.strohm@rbi.co.uk
