21.05.10
Signs of interest in value-add and better quality secondary opportunities. European commercial real estate investment turnover is expected to reach more than €100 billion in 2010, a significant increase on the €73 billion reported in 2009, according to the latest CB Richard Ellis (CBRE) European Capital Markets report. Trends in the European real estate market so far in 2010 have been increasingly positive, although largely confined to the prime segment of the market, with increasing lender confidence, value recovery, and growing investor demand all helping to drive transaction volumes and size.
The improvement in the lending market is particularly notable. Whilst there have been relatively few changes to key lending terms, there are some signs of greater lender confidence. These include growth in the availability of development finance and the offer of mezzanine finance at a more attractive price. The latter is particularly important, as it reflects the trend that both investor and lender interest in value-add and better quality secondary opportunities is starting to increase. As senior debt lending remains conservative, more opportunistic buyers will be looking to finance using a combination of senior and mezzanine debt.
While CBRE expects the European property investment market to see more than €100 billion transacted in 2010, the extent to which value-add and opportunistic investment increases will have a large bearing on the actual outcome. Thus far, the UK and increasingly France have been the two markets to see investor demand expand into these secondary segments. Now, however, there are the first signs that other major western European markets are also starting to attract more opportunistic buyers.
Jonathan Hull, Executive Director of EMEA Capital Markets, CB Richard Ellis, said: "Restricted by lack of product, a lot of investor demand remains unsatisfied, prompting investors to start actively considering value-add opportunities. Driven by either better economic and occupier fundamentals or simply by a distressed opportunity, a number of value-add investors have made their first acquisitions in western European markets other than the UK and France. Germany, Poland and Spain look to be the next group of markets where the recovery in investment activity in the value-add segment of the market is expected later this year and into next year."