EUR 230bn - European investment volumes forecast

According to the international real estate advisor, whilst Germany, the UK and France will continue to attract the lion’s share of investment, Poland (+46% growth year-on-year in 2018), Denmark (+38%), Finland (+32%) and Portugal (+27%) are all forecast to significantly see commercial investment volumes exceed their respective five year averages in 2019.

The US, followed by Singapore and South Korea made up the three largest non-European investor groups in 2018 and are forecast to continue to dominate in 2019, says Savills.

Lydia Brissy, Director, European Research, Savills, says: “The US remained the major contributor in the European property market accounting for 48% of the non-European volume recorded in 2018 at €27.4bn, with France becoming their main targeted destination followed by the UK and Germany. At the same time, Singaporean investments in Europe almost doubled from €2.9bn in 2017 to over €5.6bn in 2018, accounting for 10% of the total overseas volume and making them the second biggest non-European investor group. South Koreans invested €5.4bn in 2018, up from €4.89 in 2017, the third biggest investor group. While continuing to target offices in CBD locations they have recently broadened their market coverage to non-core countries, notably Belgium, Poland, Italy, Ireland, Denmark and Spain.”

Mike Barnes, Associate, European Research, Savills, adds: “As well as logistics, multifamily investment in core cities with strong demographics will remain high on the wish list of investors this year. In the Netherlands, for example, we expect total residential investment volumes to be in line with office investment volumes. We also expect an increasing proportion of new office and residential space to be delivered in mixed-use schemes as landlords look to diversify their income pool.”

Savills highlights that the gap between average European Prime Office CBD yields and 10-year government bonds is wide by historical standards (212 bps in 2018, compared to 185 bps in 2008/2009) and as long as this gap remains, buyers will continue to invest in commercial real estate to receive higher returns in an income-led environment.

Marcus Lemli, Head of European investment and CEO of Savills in Germany, says: “We expect the majority of European commercial property yields to remain fairly stable over the next six months. We are seeing South Korean and Singaporean investors in particular increase their investment volume and expect South Korean activity in continental Europe and, increasingly in secondary locations, to grow in 2019. While offices will continue to be the asset class of choice, industrial and logistics assets across Europe continue to attract investors, particularly those from the US. Income and rental growth opportunities are becoming the two main drivers for investors’ returns across all sectors which requires more in-depth and granular analysis on a city area by city area level.”

John Palmer, Head of Industrial Investment at Savills in Poland, says: “2018 was an all-time record year for the real estate market in Poland with a total volume of investment transactions at over €7.2 billion, reflecting an impressive growth year-on-year. We expect that positive sentiment in the investment market will continue in 2019. In 2018 the number of investment transactions in the warehouse sector has nearly tripled compared to the previous year, ending up with a spectacular €1.84 billion volume. While industrial has been emerging to the most sought-after asset class globally, market fundamentals for the sector in Poland are particularly strong. Strategic location, solid economy, long-term growth forecasts, numerous competitive advantages mostly related to the costs of operations as well as improving infrastructure provide excellent foundation for rapid, but sustainable growth of the logistics market.