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Nine trends to track in European property markets this year

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The property markets of Europe are diverse but there are nine macro trends that we anticipate will be universal across the continent over the next 12 months.

1. Although the economic impacts are hard to quantify, the shockwaves from 2016’s political changes continue to reverberate. With elections due in Germany, France, the Netherlands and possibly Italy this year, further upheaval may be forthcoming, although voters may be more wary of supporting populist parties having witnessed events in the US and knowing that the UK is facing the likelihood of a ‘hard’ Brexit.

2. Property yields may harden by 60 basis points on average across Europe but Eurozone property will continue to be prominent on investors’ radars given the spread between prime office yields and bond yields.

3. With more readily available prime assets, competition less fierce, yields higher and solid fundamentals, investors are likely to look beyond central business districts for opportunities in secondary locations. This links to...

4. Speculative development which is on the cards again in core markets. Prime space is scarce, with some companies being forced to relocate out to suburban locations, which often offer the only newly developed large-scale office space available. With most of 2017’s forthcoming space pre-let there are opportunities for both tenants and investors to forward fund projects in peripheral areas.

5. Demand for small logistics units near city centres will continue to rise, boosted by online retailing. Investors are likely to concentrate on large European hubs such as London, Paris, Stockholm and Dusseldorf where retail sales growth will be highest.

6. Prime convenience and ‘experience’ destinations will be the strongest performing retail locations. Consumers are looking to either shop ‘next door’, where their demands can immediately be met, or visit out-of-town centres with strong food and beverage and leisure offers, where shopping forms just one part of the experience.

7. Investors will increasingly focus on assets linked to demographic trends where demand continually exceeds supply. While in more established markets yield gaps for these assets have converged with traditional commercial assets, they provide long-term stable cash flows and competitive opportunities are still available in markets such as care homes in Germany, France and Finland and private clinics in France.

8. As the need for data centres is likely to escalate exponentially across Europe in the next five years, a growing number of investors are looking at this new asset class. Hotspot markets include the Nordics, UK and Belgium, where demand for both supersized and multi-tenanted facilities is increasing.

9. The buzz around co-working spaces refuses to fade. Initially attractive to start-ups and solo workers, larger corporations are also recognising the benefit of co-working. Demand for such spaces continues to be strong in locations such as Spain, Germany France, Italy, UK, the Netherlands and Belgium.

Further information

Contact Savills Central London Retail


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