Central and Eastern Europe, the Eurozone Periphery and the Benelux regions have the highest share of underpriced markets and boast the most attractive opportunities for investors.
Industrial commercial property assets across Europe are offering investors the best return for their money with Frankfurt, Madrid, Riga, Vilnius and Antwerp in particular looking under-priced, according to research out today from Cushman & Wakefield.
Cushman & Wakefield's European Fair Value Index™ published today identifies Europe’s most attractive office, retail and industrial markets for prime commercial property investment on a five year hold period. The report shows that Europe still offers plenty of opportunities to invest, with 47 markets classified as under-priced in the Q3 analysis. Central and Eastern Europe, the Eurozone Periphery and the Benelux regions have the highest share of under-priced markets and boast the most attractive opportunities for investors.
The overall Fair Value Index™ for Europe was 62, the same as for Q2 2015, meaning that opportunities for investors are broadly unchanged.
Fergus Hicks, Associate Director at Cushman & Wakefield, said: “The European property market continues to offer attractive investment opportunities. However we expect opportunities to diminish further as yields continue to edge lower and cause the number of 'fully priced' markets to increase. Although bond yields fell across Europe this quarter, in the vast majority of markets the impact on fair/required returns was more than offset by an increased illiquidity and property risk premium.
“The likely extension of the ECB’s quantitative easing programme would be supportive of real estate and we think prime property yields in core Eurozone markets will not rise until 2018.”
Matteo Vaglio Gralin, Associate Director at Cushman & Wakefield, said: “The industrial commercial property sector continues to offer investors the best possible return, with 70 per cent of the sector under-priced according to our fair value analysis. Ongoing changes in retail distribution and the impact of the internet continue to bring about change in the logistics sector. However, the higher yields available compared to retail and offices are making for good investment opportunities.”
Looking ahead, the European Fair Value Index is set to decrease in the short term as strong investor demand continues to push property yields lower and attractive investment opportunities diminish. In most core Eurozone markets, yields are not predicted to start to increase until 2018. The office and retail indices are both expected to bottom out in 2017, while offices are expected to reach their low at the end of this year.