RELATIVE VALUE IN THE FOUR QUADRANTS The latest Four Quadrants editorial meeting saw a gathering of real estate professionals with over 100 years of collective industry experience. The theme was a familiar one: ‘What point have we reached in the real estate cycle?’ The answer, however, is never straightforward and never the same. The trend of significant investor interest in the asset class continued across all four quadrants during the second quarter leading to elevated activity. This crystallised in large volumes of raised funds in both the public and private equity markets and more aggressively priced bond issuance in parallel with further increases in volumes and margin compression in the private debt markets.
This report is designed to provide our clients with an immediate view on prime rents and yields across major markets and sectors in the region as at the end of the quarter. In 2015, prime European hotel yields - split up by operating type - have been included in this publication for the first time.
Through H1, European hotel investment volume is 84% into the total level of investment for full year 2014. CBRE anticipate that European hotel investment could exceed €20 billion in 2015 for the first time in the history of the asset class. Increasing appetite from institutional investors is largely the result of a structural shift in interest rates and subsequently humble yields offered by government bonds. Economic recovery is unlocking investment interest in an increasing number of European hotel markets. Countries considered to be further along in the cycle such as Germany, France and the UK continue to register mounting deal volumes
Total investment in retail property in Europe in Q2 2015 was €16.2 billion, continuing the 30%+ per annum rate of growth in investment activity. Germany and Norway made the biggest contributions to the year-on-year increase, although the UK remained the biggest single market. Cross-border investment made up 48% of total retail activity, with investment within Europe the majority of this. Although the USA remains the biggest single source of cross-border investment in retail, it is a much smaller proportion of investment in the retail sector than in other property sectors. Prime retail yields continue to fall rapidly, although the rate of decline has slowed slightly.