Huge investor appetite for European Commercial Property; Bankers ready to raise lending to €112bn as returns expected to exceed 2005

European
Huge investor appetite for European Commercial Property; Bankers ready to raise lending to €112bn as returns expected to exceed 2005
By Finfacts Team
Mar 27, 2006, 16:06

International property consultants King Sturge’s survey of European investors and bankers has revealed a sharp increase in projected investment in commercial property across Europe in 2006.

WORST THREE MARKETS 2006

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Source: King Sturge

The European Property Investors & Bankers Survey was based on interviews with 60 major European investors and bankers, who invested €168.2bn or lent €129.6bn in property in 2005. Respondents revealed a rise in expected lending from €72bn last year to an intended €112bn in 2006.

King Sturge also found that while the UK and Germany remain hotspots for investment, there is a striking difference in optimism re Eastern Europe – 48 percent of bankers had it in their top three targets, versus only 27 percent of investors.

The report’s author, Dr Angus McIntosh, head of research at King Sturge said:

“The survey reveals a sharp increase in lending intentions for commercial property investment across Europe. But it suggests there will again be a striking contrast between projected and actual investment partly because quality property remains extremely scarce. Nearly half (45 percent) of the €47bn these investors had to invest in 2005 remained uninvested.”

The report also found a consensus over REITs, which were uniformly seen as beneficial for the property market, while there was considerable scepticism over property derivatives.

Dr McIntosh said: “We also found significant caution over indirect investment via property derivatives, but great hunger for investment via REITS.”

He added: “While it is striking how investors and lenders share confidence in the UK and German markets, there is less consensus between investors and lenders in Eastern Europe, where lenders are more optimistic. The reverse is the case in France.”

The report, which is available on request, asked respondents for their views on returns in the UK, German, Italian, Spanish, French and Eastern European markets. It contains findings on projected returns in the office, retail, leisure and industrial sectors in key markets.

The research also found:

Banks lent €72 billion in 2005 but would like to lend €112 billion in 2006.
With the exception of some New Central EU States, investors and bankers think returns in 2006 will be higher than 2005.

In terms of major sites for investment, the report found:

The best market opportunities are perceived to be Germany, France, Central EU States, UK and Spain. Best markets for rental growth were expected to be:
- Offices: Spain, New Central EU and France
- Retail: Spain, New Central EU and Germany
- Leisure: New Central EU, Germany and Spain
- Industrial: France, UK & Germany
Property investment yields were predicted to fall (causing further capital growth) in following territories:
- Offices: France, New Central EU & Spain
- Retail: New Central EU, France & Spain
- Leisure: Spain, New Central EU & France
- Industrial: New Central EU, Spain, UK & France

Investors named the worst investment markets as Italy, Germany, Netherlands & Spain.

The research also revealed that 30 percent of respondents believe they will create and invest in Real Estate Investment Trusts in 2006. Only 23 percent of respondents said they were very likely to invest in Property Derivatives.

More than 43 percent of investors and 72 percent of bankers are not familiar or have never heard of Property Energy Certificates, which will be introduced in the EU over the next few years grading every building according to its energy consumption.

European Property Investors & Bankers Survey 2006