With the 10-year average bond yield in the US, Japan and Europe dropping to its lowest level ever, the current euro depreciation and the strong recovery in the Eurozone - property investments in Europe are becoming more attractive for Middle East investors.
According to Savills, a potential £7-10 billion will be invested into European real estate markets from this region this year.
Commercial real estate investment made in European territory equalled €80.1bn (Dh312bn) during 2014 representing a 20 per cent increase compared to 2013. In the office sector, Madrid leads the way in Europe with a 245 per cent growth between 2013 and 2014 according to BNP Paribas. In terms of total investment, London and Paris top the listings in Europe with more than £20bn and €17bn respectively.
Following an economic recovery, Madrid registered the third consecutive period of growth in Q4 2014, both in terms of full-time jobs, as well as permanent jobs which contributed to the increased take up of space for the first time in seven years. This trend is likely to continue with the creation of new jobs.
Spanish reits known as SOCIMIS were the main players during 2014 with 39 per cent of the total investment followed by investment funds with 19 per cent which helped office investment received during 2013 surpass €2.5bn in 2014, according to Spanish consulting firm Aguirre Newman.
Maintaining a positive trend since H2 2013, selling prices within the central business district rose by 11 per cent during 2014 from €4.666 to €5.188 per square metre. Likewise, rental prices are also on a rise since 2013 with a 4 per cent increase during 2014 and forecasts indicate that during 2015 this increase could duplicate the last figure reaching 8 per cent, according to Aguirre Newman.
The lack of new developments and modern office space in the centre of Madrid forces investors to refurbish and adapt older building to the current market demands. The excess of liquidity and the lack of product on the market that meets investors’ requirements has meant office yields have generally hardened, particularly with regard to prime yields which now stand at similar levels with the European average.
Source: The National