While still cautious, global commercial real estate investors favor “safe haven locations” in Europe, especially German cities, according to a real estate forecast published jointly by the Urban Land Institute and PricewaterhouseCoopers.
It indicates in 2013 more capital will be invested in Munich, the top favorite city, followed closely by Berlin in second place and Hamburg in the fifth position.
Findings from the “Emerging Trends in Real Estate Europe 2013” report show the attraction is in these cities’ “strong local micro-economic climate and resilient property market conditions.”
Simon Hardwick, real estate partner at PwC Legal, also sees a new normal in investor attitudes. They are approaching opportunities with a new mindset, conscious that the environment in which they are operating” is set to stay the same for some time yet.
The report shows respondents to this year’s survey were the most optimistic about the future since 2008 indicating a wider trend, “a movement away from investment strategies centered on whole countries, cities or industry sectors and towards a focus on specific individual assets and opportunities,” Hardwick said.
Joe Montgomery, chief executive of ULI Europe, finds investor interests are changing due to a change in focus “on the harder-to-find opportunities in blue-chip cities such as Munich, Berlin, London and Paris, rather than turning to secondary locations in search of higher returns.”
The ranking includes 27 cities across Europe based on investor expectations for market performance in 2013.
Up and coming in the ranking is London, “seen by many as Europe’s ultimate safe haven” CRE market and the largest market to earn new investor interest and thus taking the third place in the 2013 ranking.
Besides size and liquidity of the RE market, the report notes, the London RE market also benefits from a stable currency “and its ability to stand alone from the rest of the U.K. and Europe’s economic issues.”
London is one of the larger Western European centers “with international appeal and better economic prospects” that made the overall highest ranking.
Not surprisingly the report finds the worst performing cities were “in countries at the heart of the euro zone crisis” or large cities such as Athens, Lisbon, Dublin, Madrid and Barcelona that still are struggling to cope with the consequences of the 2008 financial meltdown.
The only exception in the top five, ranking fourth, was Istanbul. If the aforementioned Western European cities appeal to investors because of their inherent safety, the report finds Istanbul remains the most popular location for future development opportunity with “exciting real estate potential” driven by economic growth which rivals China and demographics where the average age in Turkey is only 29.
In addition, recent changes to foreign ownership of Turkish real estate are expected to attract billions in international capital from foreign investors, including American investors.
