The economic malaise gripping Europe will force more investors to shun secondary assets and non-core markets, but competition for prime will keep prices high at the top end of the market, according to CBRE.
Sovereign debt problems and divergent national economic performances will further polarise property markets across the continent, with the gap between prime and secondary widening as a result.
Peter Damesick, EMEA chief economist at CBRE, said: “Current drivers among both equity based and debt-financed investors are leading to a concentration on prime quality assets in core markets. This is becoming a crowded space where investors are finding it difficult to secure sufficient opportunities of the quality required. Meanwhile, in much of the rest of the market, liquidity is limited and pricing much more uncertain. Heightened uncertainties created by the sovereign debt crisis and downgrades in growth expectations are reinforcing these trends.”
Very low returns on cash and government bonds continue to ensure that prime property yields remain attractive, but investors will focus on “larger, more liquid markets, and those perceived to have stronger economic fundamentals”, he said.
By sector, retail has taken a larger share of the European investment market in 2011, with the volume of purchases in the first six months up by 29% on a year earlier.
Investment volumes in Italy and Spain were down by more than 40% in the first half of 2011 compared with H2 2010. In Portugal, transactions declined by 80%. The UK and France also saw reduced activity in the first half compared with H2 2010, while Germany saw a 6% increase and Central and Eastern European markets in aggregate recorded a 49% rise in investment volume.
damian.wild@e statesgazette.com
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