Values rise across all asset classes at a faster pace than seen in the previous quarter. The All Property Index strengthened to 2.5% on the quarter, driven by value growth in Germany, Netherlands, Southern Europe and Ireland in particular.
The Industrial sector was the leading performer, with value growth of 3.4% in Q4. Retail and Office grew at a higher rate of 2.3% and 2.2% respectively, compared to Q3.
Grouping equivalent yields into quartiles, we see that there was yield compression across all quartiles. The European market is continuing to see yield compression across most asset types. This is likely to be a sign of the limited availability of top quality assets along with the historically low interest rates.
Over the quarter, Germany and Netherlands were the best performing at the All Property level, both rising by 3.6%.
Poland is -2% over the year, but other CEE countries are similar to the rest of Europe and c. +6% on average
All Property values rose by 1.9% in the UK on the quarter which followed an improved trend compared to the preceding two quarters of 1.4% in Q3 and 1.2% in Q2. Industrial is the main driver of this increase.
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.
• 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
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.
The Property Handbook is a guide for investors that wish to learn more about the Portuguese property market. In this publication we provide an economic outlook, show the market evolution over the past 10 years on the investment and occupation side (including office, retail, logistics, hotel and residential sectors) as well as the current property legal and fiscal framework. In At a Glance we provide a summary of the complete guide contents.
We expect the Czech economy to remain strong in 2018. Although wage costs are rising, companies are continuing to expand, which is good news for the office and industrial sectors. As wages are rising faster than inflation, people have more disposable income which will have a positive impact on the retail sector.
An increased confidence in the fundamentals of the CEE economies has been pushing investment volumes up. Investors have shown great appetite for the Czech Republic while Czech investors have been investing in other markets at never before seen levels.
The Prague office market has been experiencing a very active period. Supported by a positive economic outlook, the positive market sentiment is expected to continue through 2018. We forecast take-up will once again exceed 300,000 sq m in 2018.
The Czech industrial & logistics market has been growing rapidly. With consumer spending growing, retailing has become the prime driver of the market.It is all about people nowadays, companies need to create attractive and productive work environments.
Currently, the retail sector in the Czech Republic enjoys a very favourable period. The Czech economy is growing, and both purchasing and consumer behavior are experiencing positive development. The desire to be in the right location in the most appropriate city is as important as ever and this is helping to drive prime rental growth.
Ireland annual report containing final year figures for transactional activity in each sector of the Irish commercial property market in 2017 and predictions for each commercial real estate sector for the year ahead.
2017 was a very active year for the Irish commercial real estate sector although returns and transaction volumes returned to more normalised levels following three years of out-performance.
The occupier markets continued at pace with the office sector being the star performer. The bulk of leasing activity in the office market in the capital emanated from the expansion and relocation of existing occupiers with Brexit providing a welcome additional layer of demand during the year. Indeed, the volume of leasing activity accounted for by UK occupiers more than doubled year-on-year.
Prospects for the Irish commercial property market remain very promising although economics, tax and politics will continue to have a huge bearing on the trajectory of the market over the next 12 months.
The Irish CRE market is now approaching late cycle in many respects. However, occupier activity remains robust, development is controlled, the market is priced attractively compared to the rest of Europe and there are still considerable opportunities for both occupiers and investors alike.
In addition to demand for office and industrial & logistics opportunities, we expect to see continued flows of capital into alternative sectors over the course of the next 12 months with particularly strong demand for residential investment opportunities in Dublin, considering the stable long-term income streams this sector can deliver. Alternative sectors will become increasingly mainstream
With Amsterdam as one of the gateway markets of Europe, the Netherlands was one of the best performing European investment markets in 2017 with a record investment volume of € 19.5 billion. And with a strongly performing economy and expanding occupier markets, the prospects for 2018 are sound. Investors’ risk appetite will increase in the year to come, putting more unconventional locations and investment classes more firmly on the radar. The crucial question will be whether there are enough high-quality properties on the market to satisfy investor demand.
Future growth outpacing 5-year average showing positive momentum for the Dutch economy.
Key differences current upturn versus previous upturn are lower LTVs, softer pricing outside prime segment and more cautious investor behaviour.
Strong investor demand, but scarcity of product putting investors under pressure to find creative ways to deploy capital.
Lending terms increasingly favourable and growing appetite for debt in real estate transactions.
The economy should maintain a good pace of growth in 2018, with a GDP increase and the continued decline in the unemployment rate.
The commercial real estate investment market is expected to achieve a new record, with an increase in the number of new players and a diversification to alternatives products.
In the office sector, the lack of new product will continue over 2018 and will reflect on the vacancy rate decline, on the prime rents rise and on the increase of pre-lettings and renegotiations. The supply and demand for flexible offices spaces will increase.
Private consumption and the number of tourists will continue to incentive the retailers’ expansion. Openings of new shopping centres give way to extension and refurbishment works as well as innovation projects; most of these works will target food courts and leisure areas. The completion of the refurbishment works in some buildings will bring new commercial spaces to the prime high street axis and the expansion of retail to the surroundings streets, where the supply is higher at a lower price, will continue.
In the logistics market, the quality spaces are scarce in Lisbon and Porto, and the lack of supply will condition the take-up, which should be lower than in 2017. The construction of new build-to-suit and probably some speculative developments, as well as e-commerce dedicated structures will start.
The growth of demand for housing should continue to be significant throughout 2018, with the domestic market gaining a greater weight in relation to the foreign market. Nevertheless, the demand will continue to far exceed the supply and leveraging a price increase.
Tourism should maintain the growth trajectory, although with more moderates increases than in 2017, namely in the number of overnights and prices. New hotel supply will maintain levels of growth below the demand. Differentiation will increasingly set the trend on new projects.
The continuing economic upswing provides positive environment for the Austrian real estate market in 2018.
The strong activity of German investors enabled a new record for commercial real estate investment volume. In 2018, the demand remains high and, at the same time the challenges, however, lie in securing product availability.
New flexible office offerings are expected to stimulate the Viennese office market in 2018.
International developers are stepping up their activities in Vienna region and bringing logistics and industrial space speculatively onto the market.
European commercial real estate investment volumes reached a record high of €285 billion in 2017. This represents an increase of 9% on the previous year and 2% up from the previous peak in 2015. An upturn in UK investment volumes, coupled with a near record performance in Germany, provided a significant boost to European volumes, contributing €73 billion and €57 billion respectively to the year-end total.
2017 was a record year with never-before-seen take-up volumes, as well as major new locations for large retailers and pure-players. Although market fundamentals remain strong, there has been a clear compression in the early months of 2018 which have recorded approximately 1/3 fewer transactions year-on-year. This compression is particularly evident in the Paris region, given last year's record transactions. The scarcity of new property developments contributes significantly to this poor performance. The existing property market has proven more robust than both 2017 (which was marked by turnkey transactions) and the 10-year average (+18%).