Strong investment demand and low bond yields pushed prime property yields lower across all property sectors in Q4 Prime yields around 30 basis points lower at the end of 2014 than a year earlier Rental improvements remain patchy, but increases recorded in key office markets including London, Frankfurt and Madrid UK markets feature prominently in Q4 growth
Investment volume in hotels grew in 2014 y-o-y by 30%; amongst the strongest growing commercial asset classes Y-o-Y. Strong trading growth in the UK has continued to attract high levels of hotel investment. This has been underpinned by portfolio deals, a trend likely to continue in 2015. German transaction levels have continued to surge despite a slowdown in trading performance. Trading growth has been somewhat dampened by economic and political headwinds and the investor appetite for hotels in France has been impacted as a result, particularly outside of Paris. The decrease in y-o-y transaction volumes can also be attributed to a particularly strong 2013.
Eurozone economies will continue to improve slowly in 2015 with Spain and Ireland to the fore, France and Italy lagging and Germany resurgent. Non-euro EU countries will outperform. The fall in oil prices provides a potential upside for most European economies. It is also broadly positive in its impact on Europe’s real estate markets. Prominent areas of uncertainty include upcoming general elections, geopolitics and where oil prices will eventual settle down. Headline inflation to remain negative through most of 2015 in many countries. Heightened risk appetite amongst investors will persist in 2015, resulting in further growth in investment activity; with Italy and Portugal in particular benefitting. Office leasing volumes, and prime rental growth to strengthen and become more widespread through 2015. Retailers pursuing dual strategy of developing online platforms and new store openings in increasingly competitive environment. Hotel occupancy to benefit from economic recovery, with euro depreciation attracting growing US-originating traffic.
By: Richard Holberton, Senior Director, EMEA Research CBRE As leasing demand recovers in European markets and runs up against supply constraints in some cities, prospective developers will do well to understand the shifts in occupier preference that are taking place, as well as the critical role of “people issues.”
CBRE recorded total CRE investment activity of €77.7 billion in Q4 2014, only a fraction below the record level in Q4 2006. The total for 2014 was €218 billion, an increase of 32% on the previous year. On an annual basis Sweden, Spain and Ireland recorded record totals for CRE investment. The UK was also within 10% of its previous one-year high.