13.07.10
With several European governments recently announcing deficit-reduction plans, the motivation for many governments to sell public sector-owned property assets to raise much-needed capital will become more widespread across Europe in the next 12 months. The global banking crisis and recession have led to a sharp deterioration in public finances in most major economies. As a result, a number of European governments, including the UK, Germany, France and Greece, are preparing to accelerate efforts to sell public property more actively and on a larger scale as a measure to raise funds. Government-owned property sales in Europe reached €840 million in 2009, and has totalled between 2% to 2.5% of all European public sales annually over the past four years. The UK government has announced its intentions to sell around £35 billion of public sector assets over the next 10 years, with properties expected to include student housing and infrastructure.
The average deal size of last year’s government asset transactions was generally quite small, averaging €10m. It is likely to be a similar story this year as buyers avoid larger buildings that carry vacancy risk, but we expect the practice to be more widespread.
The market’s appetite for government-disposed buildings will vary depending on the reason for the sale and the type of asset. Investor demand is likely to be strongest for prime assets such as offices that governments will sell but continue to occupy, generating long government-backed income streams. Prospective buyers for these types of assets would include institutions such as local and overseas pension funds, insurance companies and German Open-ended Funds.