Savills picks top sectors for European real estate investment in 2023

The international real estate advisor expects to see several multifamily transactions take place in large cities in Germany, the UK, the Nordics, Spain and France next year where the supply and demand imbalance could lead to significant rental growth. For logistics, the UK, Germany, the Netherlands, France, and Spain have historically low vacancy rates and speculative development is set to decline, which will keep upward pressure on rents.

Savills first top pick for value-add investors next year is prime retail parks/shopping centres in Southern Europe where inflation and stock per capita are relatively low compared to the rest of Europe. A second opportunity is repositioning poorer rated office buildings to higher standards, especially in cities where the proportion of such stock is high such as Paris and Frankfurt and in countries where the deadline to achieve strong EPC ratings is tight, such as the Netherlands. 

Further investor picks are new purpose-built student accommodation (PBSA) assets in Spanish and Italian cities where the provision of beds per student is among the lowest in Europe and student populations are expected to grow; and life science opportunities in Western Europe, especially in the UK, Germany, France, the Netherlands, Belgium and Switzerland.

Marcus Lemli, CEO Germany and Head of Investment Europe at Savills, says: “We are already starting to see an easing off of some of the external factors that have brought the European investment market to a standstill in some countries this year, including interest rates stabilising, and energy prices and inflation starting to level off. As a result, we are expecting a game of two halves next year with owners and buyers becoming more realistic as the year progresses.

“As pricing becomes more transparent, this should encourage more sellers to bring product to the market at the right price, unlocking liquidity.”

Lydia Brissy, Director European Research at Savills, adds: “While the market has undoubtedly become more challenging as the year progressed, next year promises more opportunities for investors who are ready to take on some risk by repurposing distressed real estate assets after strong price correction.”

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