According to a survey conducted by Savills involving real estate investors with total EME assets under management exceeding €500bn, European multifamily, big box logistics, urban logistics, CBD offices and student housing are the top five sectors that investors are looking to invest in over the next 12 months.
When asked about their strategy going forward, over 55% of respondents indicated that they are now looking to follow a more defensive approach, focusing on the so-called ‘beds and sheds’ sectors, along with CBD offices, in the most liquid markets in Europe. This is largely because over 76% of respondents confirmed that re-financing will significantly impact their total returns over the next two years.
In terms of countries, Germany, France, the Netherlands, the UK and Spain are the top five European locations of interest.
Chris Gillum, Head of Offices, European Capital Markets, says: “Our survey confirms that certain real estate sectors will continue to see investor demand while others have, currently, fallen out of favour. Particularly those with rental growth potential are at the top of the list, linked to, for example, stronger indexation in the continental European office market.”
Mike Barnes, Associate Director European Research at Savills, says: “Over 90% of respondents reported that adopting green building certifications such as BREEAM and LEED and energy efficiency upgrades including investment in renewable energy form part of their real estate investment strategies. 97% confirmed that they already have an ESG strategy in place showing the growing importance of such plans for real estate investors.”
The survey results come at a time when Savills preliminary research suggests that the total European real estate investment volume for the third quarter of the year will reach c.€55bn, which would bring the combined Q1-Q3 figures to €200bn+. This would be a 10-11% drop compared to the same period last year.
Lydia Brissy, Director, European Research at Savills, says: “We anticipate that the total European real estate investment volume for the year will range between €275bn and €280bn. As confirmed by our survey, we believe that ‘sheds and beds’ will remain the preferred asset classes. In both sectors, a structural supply and demand imbalance is favouring rental growth.”
John Palmer, Head of Industrial Investment in Poland adds: “While the liquidity of assets is certainly lower now, supply / demand fundamentals for the industrial sector remain favourable, underpinning the outlook for continuing rental growth. Despite inflationary pressure, CEE markets remain cost-effective compared to Western Europe and with more and more companies prioritising resilience, sustainability and cost, Poland and other CEE markets may actually benefit, being on top of the list as a destination of choice for near- and offshoring. The environment is clouded now and the price expectation gap between buyers and sellers has significantly widened, nevertheless, industrial investments in Poland have the benefit of strong fundamentals for future rental growth that is an attractive ingredient for investors not readily found today in Western markets.