Current developments in key real estate markets, with a special focus on logistics.
Sentiment remains positive in the European property investment market with EUR285 billion in transactions last year. Demand continues to be driven by international investors. Except for industrial properties, all categories had higher investment volumes than in 2014. Office properties (40 percent market share) were the most attractive, followed by retail properties (25 percent market share) and residential properties (13 percent market share).
In the largest investment market, transaction volume of EUR91 billion set a record in the UK. Compared to 2014, transactions increased 24 percent. Germany the second largest European market, say a marked increase with EUR66 billion in transaction volume. This was driven by the ongoing consolidation of the residential market. Spain was one of Europe’s fastest growing economies.
In Central Eastern Europe, real estate investment volume has been increasing for the past three years. The French market had an excellent recovery after a disappointing start in the second half of 2015. The Netherlands has a positive economic outlook. In the Nordic region, cross border investors are taking advantage of currency movements. In Turkey, the residential market was up 18.9 percent in the past year compared to the 2.7 percent global average.
Austria is a stable market supported by a sustainable economy. Belgium is on the path of economic recovery. Italy maybe out of the doldrums? Russia, though, is facing challenges and opportunities.
Peripheral European cities are seeing growth. International investors are increasingly focusing on cities such as Milan and Madrid. The Spanish capital, with a volume of EUR5 billion, moved from 8th to 5th in popularity among European investment locations. And Istanbul continues to be a center of attraction for investors.
E-commerce grew 22 percent last in Europe, creating strong demand for warehousing space and distribution networks. There are many opportunities for investment in and development of warehouses to service the e-commerce sector particularly in Paris, London, Berlin and Madrid. Logistic premises are expected to grow significantly as the e-commerce business model streamlines the supply chain through multiple retail/storage points. Demand for logistic assets are expected to push up rents and values as retailers strive to secure the right property in the right location.
Despite an initial weakening trend this year, we anticipate transaction activity in Europe to remain strong. Sound economic prospects are underpinning demand for properties. An important driver is anticipated to be the lack of alternative investments as investors search for returns in the current low interest rate environment.
The challenging and increasing complex real estate markets require a clear focus and a flexible strategy.
© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.