Risk-averse investors are focusing their attention on core European property markets, with interest in secondary locations and assets declining. According to Knight Frank, the ongoing eurozone crisis has resulted in many investors taking a "safety first" approach to real estate markets. The firm highlighted Germany, the Nordic nations, France and the UK among the most robust places from an investment perspective, but pointed out that much of the money flowing into France and the UK is directed at Paris and London, rather than other regions.
Andrew Sim, head of European investment at Knight Frank, commented: "The core markets have remained buoyant and none more so than London. Despite the continued worrying levels of tenant 'inactivity', we have seen prime yields harden under the ever-increasing flow of international capital." He also pointed out that a lack of prime assets in the British city has resulted in some investors broadening their "investment horizons". Mr Sim described this as a positive move and predicted the trend will continue "with investors gently drifting towards more 'added-value' opportunities in the strongest markets".
Despite the fall in real estate investment volumes recorded by Knight Frank, CBRE released more positive data earlier this month, revealing that cross-border transactions increased in the second quarter of this year. According to the company's figures, 46 per cent of all the property deals concluded in this three-month period were by non-domestic buyers. In addition, the proportion of non-European investors climbed to its highest point since 2007, with investors from outside the continent accounting for 25 per cent of transactions.
CBRE noted that many of these non-European financiers were targeting assets in the UK, France and Germany, painting a similar picture of the investment market to that portrayed by the Knight Frank findings. Partner in the Knight Frank research team Darren Yates commented that, despite concerns over the ongoing eurozone debt crisis, property in the continent remains a popular asset class because it still delivers "a significant premium over bond yields", especially in the continent's stronger economies.
- Friday 14 September 2012