This article is from the Australian Property Journal archive
EUROPE'S commercial real estate market has stabilised and transactions are expected to pick up the second half of the year, according to the Jones LaSalle.
According to JLL, €24 billion worth of properties were transacted in the first half of this year down 42% on the second half of 2008 (€41.5 billion).
JLL’s European research chairman Nigel Roberts said the UK remains the largest market in Europe, accounting for 35% (approximately €8 billion) of total European volumes, whilst Germany accounted for approximately € 3.4 billion.
Major Western European markets were marginally up in the second quarter compared to the first, albeit from a low base, including France, Spain and Italy, as attractive investment opportunities – often assets which rarely come to the market – have appeared.
But JLL head of European Capital Markets Tony Horrell believes the European market has now reached a floor in transaction volumes.
“Volumes have remained low because the bid offer spread remains wide in some markets due to price expectations and needs of owners. At the same time falls in capital values have made pricing attractive for those investors with equity or buyers who are not highly leveraged and who have good banking relationships,” he added.
Horrell said high net worth individuals and equity players are making the market at the moment, as the debt markets remain largely restricted.
And he added that based upon investor interest he expects an increase in turnover in the second half of this year.
“There is no shortage of equity for income secure opportunities. We are seeing deep investor interest in London, with multiple bidding from international investors, some of whom continue to benefit from currency advantage,” he continued.
Roberts said despite restrictive new lending conditions during the second quarter there were a number of transactions over €100 million, although the majority of trading was in lot sizes between €20 million – €50 million.
“For many investors long term income and a strong covenant is the primary driver to making an investment decision; however investors remain risk averse to vacancy, short leases and capital spend,” he added.
Horrell said the market is seeing some price tension on small deals, mainly because they are equity led.
“Overall we expect to see a gradual pick up in volumes in the second half of the year across Europe, subject to availability of quality product. Investors will be watching closely to see if the perception that the market is turning in some geographies gathers pace.
“Whilst this is at variance with a weaker occupational outlook, those with the ability to buy will be keen not to miss the purchasing opportunity that appears before the bottom of the market,” he concluded.
Australian Property Journal
