With some credit easing and property values stabilising, Europe’s real estate industry will see some improvement in 2010, but still faces a ‘long, slow haul’ to recovery, according to the report “Emerging Trends in Real Estate Europe 2010” from PricewaterhouseCooper.
“The industry is apprehensive as it is not clear how this will play out, in terms of whether financial institutions will sell real estate assets and loans, or extend and pretend.”
In terms of individual cities, Munich and Hamburg were ranked by the report as the top two prospects in 2010 for existing portfolios.
The seventh annual report is based on surveys and interviews with well over 600 of the industry’s leading authorities, including investors, developers, financiers, and property managers. Overwhelmingly, respondents cite the need to move forward cautiously, as Europe’s economy remains fragile due to high unemployment and low consumer spending.
Additionally, the report notes the looming problem of massive refinancing of real estate debt totaling hundreds of billions worth of euros. The industry is apprehensive as it is not clear how this will play out, in terms of whether financial institutions will sell real estate assets and loans or “extend and pretend.” This challenge for the real estate sector is compounded by uncertainty over how, and when, European governments might wean their respective economies off the massive injections of state support. An abrupt withdrawal of the stimulus funds could derail the recovery, and even push the economy back into recession, the report notes.
In general, Germany is viewed more favourably for investment and development activity than other countries, due primarily to its broad economy. In terms of individual cities, Munich and Hamburg were ranked by the report as the top two prospects in 2010 for existing portfolios, a ranking they also held in 2009.
Paris was ranked third by Emerging Trends in terms of prospects for existing portfolios, edging out London due in part to the general perception that it has a wider economic base and is less dependent than London on the financial services sector. Interviewees pointed to the low level of vacancies in Paris, raising its ratings for investment opportunities and, to a lesser extent, for development.
Additional markets rounding out the “top ten” named by Emerging Trends for existing property performance prospects are Vienna, Milan, Istanbul, Berlin, Rome and Frankfurt.
In terms of property types, the quality of the location, building and tenant is the main consideration, according to the report. Centre city offices, high-end street retail and shopping centres are the top commercial investment choices for 2010. Residential investments are also highly rated. Although mainstream property types are preferred, niche sectors continue to have some limited appeal, including student housing, self storage, retirement homes, social housing, healthcare facilities and infrastructure.
Source: PR Newswire
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