Core/Core plus tip: Shopping centres in growing cities – Short term
Prime, dominant shopping centres with strong catchment areas in terms of population, tourism and affluence will remain winners in the retail scene. They will continue to attract shoppers and visitors and, whether they generate sales onsite or online, retailers will want consumer exposure via these leisure, lifestyle and experience destinations. London, Paris, Munich, Madrid, Berlin, Moscow are expected to show strong population growth over the next decade and, importantly for retailers, to retain a high share of affluence.
Core/Core plus tip: Prime sustainable workspace – Medium term
Innovation sectors are expected to grow fast over the next decade in Dublin, Madrid, Barcelona and Warsaw and this should attract a talented young and old workforce so buy prime ‘green’ offices in these, and other, innovative/smart cities. In the UK, the most dominant and largest European market, investment activity has focused on London so it is now the turn of the UK’s second-tier cities to shine. Cities like Manchester, Birmingham, Leeds and Bristol are among those where rental growth and growing investor interest should impact total returns. Occupiers will be focused on attracting human capital and the top talent wants smart, sustainable cities with a good lifestyle. Investing in flexible, sustainable buildings favoured by the 21st century workforce is essential as this will be a key parameter for innovative companies with corporate social responsibility high on their agenda.
Value add tip: Hospitality and Mixed Use in European Heritage Cities – Medium term
People like to visit and live in cities with history, creativity, cultural and tourist attractions, lively, mixed use city centres, diverse retail offer, interesting leisure activities. Several cities in Europe are attractive in this respect and in many of them old historic buildings in attractive locations are not being used to their full potential or have not found a new role yet. Refurbishments and conversions and the use of new technologies can add value to such properties. In London, Madrid, Milan, Vienna, Paris, Stockholm, Amsterdam an increasing number of buildings are converted from offices to residential or hotels, and being redesigned and reused for retail, cafes and restaurants. The old continent offers many of these opportunities for imaginative re-use, innovation and hospitality.
Opportunistic tip: Offices and office development in Eastern Europe – Medium term
Lower labour and property costs combined with high education levels in Eastern Europe are acting as a magnet to back office operations for large western companies. Eastern Europe presents a good alternative to outsourcing in the more remote and culturally different markets of the Far East. It also benefits from being in a closer time zone. Near-shoring is a trend which may offer opportunities for office investments/developments in secondary office locations/cities in places like Poland, Czech R., Hungary, Romania, Slovakia, Bulgaria and Slovenia.
Opportunistic tip: Europe Healthcare – Long term
The ageing population in Europe and the influence and affluence level of the post-war 'baby boomers' means that there is a need not only for more and better healthcare facilities but also ones which will offer a wide spectrum of services and support. With the high level of indebtedness of some European governments, it is less likely that the public sector will provide the facilities that might be in demand in places such as Spain, Italy, France and elsewhere. Investing in private clinics, care homes and other facilities, especially in markets with above-average affluence levels like Germany and France, is an already-emerging trend.
Opportunistic tip: Micro-apartment developments in high-demand cities – Short term
The rising number of single households as well as the ageing population, smaller households, immigrants and students in big cities where conventional housing supply is limited is translating into demand for affordable 'micro-living'. Investing in student housing and micro-apartments in cities with large student communities and rapid urbanisation trends is something that we have already seen happening in the UK, Netherlands, Germany and accounts for a rising share of investment activity.
In the future this can continue to focus on the mega cities of Europe (London, Paris, Berlin, Madrid, Munich) but also in growing innovation hubs such as Dublin, Barcelona, Amsterdam, Stockholm. In this sector there could be two options: one to focus on affordable accommodation for the mid-low incomes and the other to focus on high end accommodation with services for higher income professionals or students.
Value add tip: Logistics in Europe – Short term
E-commerce in Europe grew by 22% last year. This is creating higher demand for warehousing space and distribution networks. Investment and development opportunities abound in warehouses which can service the new and changing needs of the e-commerce sector in Europe. These are primarily focused on the needs of the current and future mega cities: London, Paris, Berlin, Madrid.
Depending on the type/scale of the logistics space and its role to the supply chain, logistics premises may be located within the regions of these urban centres (urban logistics) or in well-positioned and connected Eastern European locations where land and labour costs are lower e.g. Poland, Romania. The sector is evolving and driven by the growth of e-commerce, technological evolution and innovations in logistics so demand is varied but expected to grow significantly. We expect rents and values to be driven up for the right property in the right locations.