• Economic conditions are positive and investors have ample capital to deploy in real estate • In EMEA, investors are planning for $475 billion in real estate investments in 2017 • For 2017, 85% of investors intend to spend at least as much as in 2016, and 40% expect to spend more • Germany is ahead of the UK as the most attractive place to invest, as was the case in 2016, but investors are showing an increasing tendency to invest in the UK despite uncertainty over Brexit • The Nordics enters the top three with a significant jump compared to 2016 • London retains the top spot as most popular city to invest in with an increased share, but Berlin shows the biggest increase, moving into second place • ‘Pricing’ and ‘Availability of product’ are the biggest obstacles to investing in EMEA real estate • Office is the most popular sector: interest in logistics has increased • Risk appetite has increased slightly • Income related factors such as ‘Yield relative to other asset classes’ are investor’s key motivations for investing in real estate
• Total nominal value of the European Commercial Real Estate (CRE) investment debt decreased slightly over the course of 2016 from €1.14 trillion to €1.06 trillion, which is largely attributed to reduced levels of investment transactions in 2016 • We estimate that new debt issued increased from €68 billion in 2013 to €125 billion in 2015, while maintaining at €116 billion in 2016 • Additionally, the amount of debt retired in 2016 is also in line with the new origination levels over the past year • 2016 was the first year, since post-GFC loan sale activity commenced in Europe, that real estate secured loan sale activity fell • In 2017, we expect loan sale activity to pick up from 2016, albeit the activity will be relatively concentrated across several key jurisdictions, for instance Italy and Spain
Expect a year of political uncertainty and the challenge of rising interest rates in Europe in 2017 Politics aside, however, the gradual tightening of some occupier markets seen in 2016 will continue in 2017, especially for better properties in the better locations Despite a gradual turnaround in the long-term interest rate trend, there is still scope for further yield compression in prime assets as rental growth and low interest rates by historical standards continues to make property look attractive 2018 or 2019, rather than 2017 are likely to be the years when the yield cycle starts to turn
PRIME RENTS •Trend of prime rental increase continues, albeit by small increments. •Central London markets begin to turn while major German markets outperform. DEMAND •Take-up levels continue to rise, with CEE markets particularly strong. VACANCY •Vacancy rates continue to decline, with most locations seeing some tightening. •Polish markets lead the quarterly decline for second quarter running. DEVELOPMENT •Pipeline still relatively static, though signs of expansion in late recovery markets like Dublin, Madrid and Barcelona. INVESTMENT •Record Q4 European investment, with Sweden leading the annual increase in the office sector.