The CBRE 2018 Europe Real Estate Market Outlook provides insight on the key trends our experts think will affect the European property industry over the next 12 months.
Positive economic environment for most of Europe through 2018 to 2019
The prospect of higher long-term interest rates will start to pose a challenge to property pricing
Continued strong growth in assets under management will put pressure on investors to deploy capital
Another strong year for office-based employment growth in 2018
Growth in appetite for flexible offices will permeate across European markets
Retailers increasingly focused on getting their city strategy correct. This will support rental growth at the prime end of the market
Very strong demand growth has cut the availability of large-scale modern space, producing capacity constraints in some of the main European logistic hubs. Coupled with strong e-commerce relate growth this will support further rental increase
The evolution of the residential sector will be supported by the sheer quantity of capital available for real estate investment in 2018, increasingly through development in order to build scale
Stock shortages and premium pricing in gateway cities for the hotel sector will encourage investors to look further afield at secondary and niche opportunities
A key feature in 2018 will be operator consolidation across Europe in the alternatives sector. This will present real estate investors with new partnership opportunities as well as enhancing covenant strength.
Global Gateway Cities reports on office and retail investment trends in 24 global gateway cities, giving investors a comprehensive overview of pricing and market conditions. Using a mix of proprietary and key external data, CBRE Research provides an analysis of investment activity as well as economic, occupier, supply, rent and yield trends in the third edition of this report series.
The CEE Market Outlook 2016 analyses the results of 2015 in regards to investment, office, retail and industrial for Central and Eastern European countries and presents the forecast for 2016.
- Economic growth is the norm for almost all CEE countries, at a speed above that of Western Europe countries.
- The dominant cyclical factor is consumer spending, which is currently benefiting from a host of positive factors.
- Investment Volumes in CEE should be at minimum similar to those from 2015 (EUR 9.978 billion, except Russia).
- Historical high office demand is registered in almost all CEE countries, driven mostly by IT & outsourcing international occupiers.
- Buyont retail market, on the back of rise in private consumption, leading to tenants turnover increases and interest from investors in retail products.
- Even if industrial demand is reaching historically high numbers (in some cases up 65% compared to 10 year averages), there is limited speculative development.
- Hungary is a country that has grown under the radar for the past 12 – 18 months. With a number of indicators looking very promising – well past the region average –, we make a case for Hungary as the go-to-destination in 2016.
• E-commerce growth, changing consumer requirements, and a rise in automated technology are restructuring supply chains and changing the logistics landscape in Europe
• Making maximum use of a site is critical with strong pressure to store and handle as many units as possible whilst being in close proximity to core markets
• Not only can operations save on cost of land, they can also benefit from a cut in labour and transportation cost if they build vertically as opposed to outwards, or searching for cheaper space further afield
• CBRE has identified two main categories of vertical solutions likely to dominate the European logistics sector; high-bay structures and multi-level warehouses
• The uniformity of the goods handled in an operation is identified as the main factor in deciding on one of these vertical solutions
Online retail is here and it’s not going away. Retailers have to cope with the changing dynamic of the consumer. The requirement and expectation for high levels of service in store are also reflected in the offline world. The challenge for online is that the only area where the consumer can ‘feel’ the service is in terms of delivery. The delivery either meets expectation or it doesn’t. A number of key take outs are evident:
Consumers expect everything to work properly – the website, the delivery and return mechanics
Convenience and price remain key
Retailers need a clear omnichannel strategy – the retail, logistics and marketing aspects have to work together
‘Free’ delivery will only be sustainable for a few – customers want excellence in service whether that be in store or online – it’s about value not about being pseudo-free
Christmas and Black Friday is not the right time to make dramatic changes to delivery options or to technical infrastructure – get it right before these key times hit
Promising something and not delivering is far worse than never promising at all
Customers want to click-and-collect
Customers do not want to pay for the privilege of visiting a retailer’s store to collect something they have bought
A great online site is meaningless without an equally great logistics operation in place
In a general sense, e-commerce is strengthening the already visible polarisation of demand for warehouse space: large central hubs vs last mile parcel centres (‘demand dumbbell’)
There are no linear logistics responses to the various online delivery models; trial-and-error and hybrid tailor-made operations dominate, leading to a more prominent role for logistics service providers
The emphasis on convenience, customer satisfaction and an efficient return management is expected to lead to a more intricate network of last mile solutions: both parcel hubs and pick-up/drop-off sites.
The recent equity market volatility has focussed many minds on downside risk but there are good reasons to expect that European property will outperform other assets in 2016.
Office leasing is still in an early stage of recovery in many European countries/cities, and occupier demand will continue to improve as the economic recovery continues.
Office vacancy rates fell at the fastest rate since 2007 in 2015 and are expected to fall further in 2016 helped by a so-far limited development response in most markets.
The dichotomy between high performing prime and struggling secondary retail will remain in 2016 but at least rising retail spending on the back of higher real disposable incomes will be of some benefit to all retail.
There is increasing emphasis on city logistics property with investors as well as occupiers attracted by the necessity of these properties in e-commerce supply chains.
In this report we look at how economic, political, and technological forces will affect property markets in 2018 and beyond. This report is the most comprehensive sector-by-sector outlook in the industry, from flexible office space to e-commerce, and from data centres to built-to-rent. There’s a comprehensive supplement on Brexit, plus a special feature on ‘proptech’.
• A benign global economic environment, supported by a European recovery, though the UK is starting to fall behind.
• Subdued consumer spending and business investment arising from a weak currency, inflation and Brexit uncertainty.
• Risks of an overshoot in US interest rates could dampen UK growth in 2019 or 2020, though increasing clarity over Brexit will help the UK bounce back.
• Rebounding strongly from the uncertainty in the immediate aftermath of the EU referendum, the UK property investment market has seen a surprise surge in transaction volumes, particularly from overseas investors. Investment volumes are likely to remain robust at around £60bn for 2018 as a whole.
• We expect substantial political noise and turbulence arising from Brexit issues throughout 2018.
• Although agreement on Brexit withdrawal issues has taken time to secure, these issues are not likely to have significant impact on real estate. But attention will now progress to the much more important question of future trade and migration arrangements.
• EU trade access is likely to be worse than the UK has now (perhaps somewhere between the Canadian and Swiss deals with the EU), though only to the extent that migration controls are tighter than they are now.
• Our sectoral picks include industrial and logistics property, especially in urban areas and the so-called ‘beds sectors’ (residential, student accommodation, hotels and healthcare).These sectors either exhibit non-cyclical characteristics, have very significant demand and supply mismatches, or (in the case of hotels) will benefit disproportionately from the weaker pound.
Please feel free to contact us if you would like to discuss any aspect of the report.
CBRE issues for the first time the MarketView Porto, a report that analyses the commercial property market in Porto and highlights:
a growth in the supply and demand of tourism accommodation which is reflected in the expansion of the city retail activity, namely in the old town.
the increasing demand for office spaces from foreign companies, that wish to open or expand shared service businesses in Porto.
the low availability of good quality spaces, both in the office and high street retail sectors, mirrored in a reduction of take-up levels, when compared to 2016, and leading to a 4% increase in office prime rent.
the shortage of investment in development projects over the last years, both in the office and logistics sectors.
the increase in acquisitions of major sites for development as well as buildings for redevelopment, and the consequent expectation for new projects to be initiated in the near future
Pro-business new coalition will encourage economic growth
After complex negotiations that took 206 days, the new coalition agreement named “Confidence in the future” was presented on October 10th 2017. The programme contains an agreement between four parties with divergent political views: the liberal party “VVD”, Christian-conservative party “CDA”, democrats “D66” and Christian-social/green party “CU”. The plans of this pro-business government are expected to further spur the already well-performing Dutch economy. This has positive effects on the main drivers of real estate markets such as decreasing unemployment, increasing wages and rising consumption. However, not all plans will benefit the real estate market. The planned discontinuation of dividend taxes will smoothen the dividend pay-outs to foreign shareholders, but adversely affect investment vehicles with corporate tax exemptions, such as REITs. If the plans materialise, these funds will have to pay corporate taxes.
Strong employment growth benefits the office market;
Increasing consumption will facilitate growth in retail and logistic markets;
Opportunities for residential investments in the mid-market rental segment and sustainability-oriented investments.
Take-up in the Dublin industrial & logistics sector reached 48,863m2 in Q3 2017, bringing total take-up in the first nine months of 2017 to almost 170,000m2 - down approximately 20% on the volume of take-up recorded in this sector in the
same period last year
Take-up continues to be constrained by a scarcity of modern premises in core locations
Lettings of industrial buildings accounted for 63% of industrial take-up in Dublin in the quarter
In total, there were 38 industrial transactions signed in Dublin in Q3 2017 of which 24 comprised lettings and 14 comprised sales
Transactional activity in the industrial sector during Q3 2017 was primarily focused on the Dublin North West (N3) corridor which accounted for 30% of Q3 take-up
Prime industrial rents in the capital remain stable at approximately €99.50 per square metre at the end of Q3, having increased by 6% in the first half of 2017