UK and Germany are Cushman’s top picks for property investment

The UK offers some of the greatest opportunities for investors targetting European commercial property markets, according to Cushman & Wakefield.     The firm’s Fair Value Index, which examines the relative attractiveness of current pricing in the prime office, retail and logistics property markets, has ranked the UK as the second most attractive market, just behind Germany. All prime markets tracked in Germany are classified as underpriced due to repricing over recent months. In the UK, 89% of markets are underpriced, with only three prime retail streets, including New Bond Street, classified as “fairly priced”. Sukhdeep Dhillon, head of EMEA forecasting at Cushman & Wakefield, said: “Germany has experienced significant repricing, but yields have largely stabilised across the board. “There have been notable improvements across most markets, facilitated by stable total returns forecasts, a reduction in bond yields, and an improvement in the risk premium.” Cushman & Wakefield ranked France as the third most favourable investment market, offering strong liquidity but less immediate stress to force transactions, while other larger markets such as the Netherlands, Spain and Sweden were highlighted as having “good” recovery potential as interest rates fall. Elsewhere, Italy, Belgium and Ireland were identified as markets to watch, thanks to repricing and refinancing, while the current economic outlook for Poland and other Central and Eastern European markets also suggest a “good” recovery. At a sector level across all European countries, logistics has the highest percentage of underpriced markets. Retail has seen the greatest change over the past two quarters, with the highest number of underpriced markets adjusting towards fair value. According to Cushman & Wakefield, this combination of relative value and improving consumer conditions is positioning the retail sector for potential growth. Top 10 markets for opportunity  Recovery potential Liquidity Drivers to transact Expected rent growth and yield adjustment 2024-26​ Average investment volumes 2022-24 Current stress, refinancing needs, expected interest rate falls 1 Germany​ 1 UK​ 1 Germany​ 2 UK​ 2 Germany​ 2 UK​ 3 Poland​ 3 France​ 3 Netherlands​ 4 Spain​ 4 Spain​ 4 Spain​ 5 France​ 5 Netherlands​ 5 Finland​ 6 Netherlands​ 6 Sweden​ 6 Belgium​ 7 Hungary​ 7 Italy​ 7 Italy​ 8 Finland​ 8 Norway​ 8 Sweden​ 9 Czechia​ 9 Denmark​ 9 Ireland​ 10 Sweden​ 10 Belgium​ 10 France​ Source: Cushman & Wakefield David Hutchings, head of EMEA investment strategy at Cushman & Wakefield, said: “The market is turning and investors must reset their strategies. Multiple opportunities in commercial real estate across various risk profiles are emerging, balancing income security with operational gains. “Geopolitical risks mean that the recovery will be uneven, but some of the best purchases may be in the year ahead. While prime values bottomed out in Q2, secondary stock remains threatened and legacy assets remain at risk of stranding. Repositioning and repurposing such assets is a major area of opportunity, but for all assets, defining their ‘reason to be’ is key.” Photo by N Bostrom/Ibl/Shutterstock