Concrete Analysis | With Europe’s laggards on the mend, are they now a good bet for commercial property investment?
While Greece’s recovery is slow, the outlook for the previously troubled economies of Portugal, Ireland and Spain is positive and presents opportunities for investors
The euro zone in 2017 likely recorded its highest level of GDP growth for a decade, with the figure forecast to come in at around 2.2 per cent. Today’s outlook for Europe is in sharp contrast to when the European Union was reeling from the sovereign debt problems of its member states of Portugal, Ireland, Greece and Spain, known by the acronym PIGS, triggered by the financial crisis of 2008.
Initially, the bad news was focused on Greece, where the true scale of government debt was revealed in 2009 and was serious enough to threaten the very existence of the euro. Nervousness cascaded to other states, particularly Portugal, Ireland and Spain, whose economies were suffering the bursting of property price bubbles. At the worst point, government bonds of the PIGS were downgraded to junk status by international credit rating agencies.
But turbulence also means opportunity. In the wake of the crisis, opportunistic investors looked for distressed property-based assets. For many, their patience – and bravery in entering markets that many had written off – has been rewarded.
Ireland, whose economy shrank 7.1 per cent in 2009, has been experiencing double-digit growth over the last few years. Spain’s economy has been growing between 3 per cent and 4 per cent per year, corporate and household debt has reduced considerably and unemployment has fallen from around 27 per cent in 2013 to less than 17 per cent today. Similarly, Portugal’s unemployment rate fell to 8.5 per cent in late 2017, compared to 17 per cent in 2013.
Looking at the property market in Ireland’s capital, Dublin, office take-up in 2017 was at an all-time record of 325,000 square metres (3.5 million square feet), according to JLL.
