Signs of slowing in rate of yield compression Prime yields continue to fall across Europe but at a rather slower pace than has been typical in recent quarters. The office and industrial yields indices moved 7-8 basis points lower in the fourth quarter, compared with around 15 basis points in each of the previous two quarters. Among the major office market yields moved lower in Milan, Amsterdam, Munich and Madrid. Rental movements remain upward but gradual, and most pronounced in the high street retail and shopping centre markets. London and most of the main UK regional centres saw a rise in retail rents as did Dublin, Prague and Milan.
Fiery finale – strong Q4 ends record breaking year in hotels The European Hotels market has eclipsed the €20 billion threshold of investment predicted in 2015 by €2.8 billion (totalling €22.8bn), an increase of 79% Y-o-Y. A monumental fourth quarter saw 31% (€6.946bn) of capital allocated to hotels, an increase of 101% versus Q4 2014 with Western European markets leading the activity, reports CBRE Hotels. The sector is now set to transition into mainstream property investment after the hotels share of European real estate investment has increased by 6% since the last market peak in 2007. Recent confidence has been fuelled by the strength of the sector across many of the key Western European markets, in particular, the UK with €9.3 billion of investment in 2015 (+134% Y-o-Y), Germany €4.4 billion (+47% Y-o-Y) and France €2 billion (+96% Y-o-Y).
CRE Investment in Europe reached €77.9 billion in Q4, boosting the 2015 investment volume to a record €263 billion. The quarterly investment volume was 3.2% lower than Q4 2015. Germany saw the biggest growth, up €2.8 billion from Q4 2014, with the Norwegian and Austrian markets also growing strongly. Of the main sectors hotels had the strongest growth, with €7 billion of investment across Europe. This was more than double that in Q4 2014.
•Sixth annual research report which surveys key real estate decision makers to provide invaluable insight into business strategy, real estate mandate and workplace trends that are impacting the industry, while reporting what trends are being predicted for the occupier market over the next 48 months.
EXECUTIVE SUMMARY • Record year for take-up of logistics space, despite a marked decline in Q4 • Private consumption remains primary driver of occupier demand • Economies of scale and supply chain optimisation on the back of a strong M&A activity in the logistics sector • Construction pipeline remains robust, but is not leading to a widening market • Rental growth has strengthened but is carried by only a small number of markets