Concrete Analysis | Opportunities abound for experienced investors in Europe’s commercial property market
- Europe’s improving economy is expected to increase demand for office space, with rents predicted to rise 3.4 per cent this year, according to Savills
2019 looks to be another year of troubling headlines about geopolitical turmoil and global trade risks. But, despite a backdrop of Brexit and rising populism, last year saw significant investment into European commercial property.
European destinations dominated cities across the world for the volume of inward property investment, with London at the top and Paris, Amsterdam, Madrid, Berlin and Helsinki in the top 10, according to international real estate consultancy CBRE.
In the UK alone, CK Asset Holdings made the £1 billion (US$1.27 billion) purchase of 5 Broadgate, the headquarters of international bank UBS, and Wing Tai Properties and Manhattan Garments acquired 30 Gresham Street, an office building in the City of London, for £460 million.
While this may seem a surprising contradiction, it is not a shock to those experienced in European real estate investment. Having invested over US$€2.2 billion of equity in western Europe over the last 19 years, at Patron we know that amid the noise, there are significant opportunities. The key is identifying where these opportunities are and how to make the most of them.
On a macroeconomic level, there have been significant improvements in Europe: unemployment has fallen dramatically, consumer wealth has increased, and interest rates remain low. Because of the overhang of the global financial crisis, when commercial property development almost ground to a halt, supply of quality commercial real estate remains constrained, while demand has been steady, resulting in a sharp drop in vacancy rates. This will continue during 2019 and office rents are predicted to increase on average by 3.4 per cent across Western Europe, according to global property consultancy Savills.
