Real estate investors are optimistic about the industry’s potential to generate healthy returns over the coming year, according to a real estate investment report.
Emerging Trends in Real Estate Europe 2005, claims that with an abundance of capital continuing to drive markets, most firms are looking forward to another year of profitable growth, says today’s report, released at ULI Europe’s European Property Development and Investment Conference in Paris.
Urban Land Institute (ULI) and PricewaterhouseCoopers LLP, who published the report, found that 87% of the 250 leading industry authorities surveyed believe profit growth will be “modestly good” to “excellent” over 2005.
Paris is top investment market for risk-adjusted returns and rated highly for development prospects. “The fundamentals are very comforting: a diverse economic base, relatively low office vacancy, a reasonable growth outlook, a modest future supply pipeline, and now rising take-up in office space,” says the report.
London is third for overall investment prospects, as those surveyed described it as a “fairly safe market”. Milan came second in the overall investment category, and Brussels, favoured for its status as Europe’s government city, rounded out the top five for investment prospects.
Strong “buy” markets include Helsinki, Prague, Warsaw and Budapest; while Athens and Dublin are listed as strong “sell” markets.
Istanbul, which will start the EU accession process this year, is ranked first for development prospects. “This was the news the Turkish real estate industry has been waiting for,” the report says.
It is predicted that German open-ended funds will be far less active in cross-border investment during 2005 than they were in 2004.
The report also says the shift to indirect investment in Europe is set to continue as more institutions seek to diversify their real estate holdings across sectors and foreign markets.
In contrast to its 2004 report, it says that the outlook for developers has improved, particularly for mixed-use developments. “Mixed-use projects may ultimately be the only way to build modern high-quality office, retail, and residential space in a size that will satisfy growing investor appetite.”
Shopping centres are again expected to produce the highest total returns in 2005, while retail parks outrank residential as the second favoured investment choice.
The residential sector is listed as top choice for development, followed by shopping centres and warehousing/distribution space.
References: EGi News 19/01/05
