Investment activity in Europe is strong, leading to falling property yields in a number of markets. The best opportunities for investors at present are in the industrial sector, according to research conducted by DTZ.
The recently published Fair Value Index points out Europe’s best retail, office and industrial markets for commercial property investment on a five year hold period. It indicates that Europe still has numerous places for investors to put their money, and that 46 markets are classified as being underpriced in the second quarter analysis.
The top ranked markets in this quarter are industrial markets. They are situated in Denmark, Belgium and the Baltics.
Europe’s Fair Value Index for Europe dropped to 62 in the second quarter of this year from 69 in the first three months of the year. These numbers indicate that although commercial properties are attractively priced, their value relative to government bonds has deteriorated, which narrows the window of opportunities for investors.
Magali Marton, Head of Research for EMEA at DTZ, stated recently, “The European commercial property market continues to offer attractive opportunities for investors and we think industrial property in particular offers good value due to its high yields. The progress made towards a new Greek bailout agreement has lessened the uncertainty over the Eurozone and its property market, although Greece’s long term future remains in question.”
Demand for European property remained strong in the second quarter, and volumes reached close to pre-recession levels. Prime yields dropped in this quarter in 40 percent of the 117 markets listed in the European Fall Fair Index, resulting in the overall drop in the index score.
Brussels is considered the best value for investors, at 24 percent below fair value. Many core European markets are classified as fairly priced, according to the Index.
Matteo Vaglio Gralin, the Associate Director at DTZ, said, “ Looking forward, we expect the fair value index to fall further as more European property markets become fully priced. However, investors willing to seek them out will still find attractive opportunities.”
