Following a 10.8% drop in volumes over 2018, Europe is set to see a 2.5% increase in real estate investment in 2019, driven by stronger demand across a growing range of secondary cities and new sectors.
Research released at Mipim by Cushman & Wakefield on Tuesday reveals that investment volumes across the EMEA region are forecast to reach $339.2 bn (€302 bn) in 2019, a 2.5% increase on 2018 levels.
Both Europe, the Middle East and Africa (EMEA) and Asia-Pacific (APAC) are likely to see more inbound cross-border demand in 2019 as institutions from these regions increase their allocations to real estate, according to Cushman & Wakefield. Europe in particular is set to see more inflows in the short term while Asia will benefit in the medium term as investors follow demographic trends.
Last year, EMEA investment volumes totalled $331 bn, a 10.8% fall year-on-year owing to a pull-back from both global and domestic sources and the conclusion of some large portfolio deals.
European retail witnessed its third consecutive year of decline ($56 bn), with lower volumes across much of the region. Industrial and office transactions also contracted by -24.7% and -9.7% year-on-year respectively but this likely reflected a shortage of investible stock.
Globally, real estate investment volumes reached $1.75 tln (€1.5 tln) in 2018 and they are forecast to match this level in 2019 as investors target a wider range of markets to find opportunity and more sellers come forward, C&W said.
The report states that pricing is expected to edge ahead, however this will be driven by stable yields and steady rental growth for the best assets rather than yield compression which has typified recent years.
Report author David Hutchings, head of investment strategy EMEA capital markets at C&W, commented: ‘The economic environment is weaker than expected just a few months ago but so too is the inflation outlook on a global basis. As a result, while risk is up, the day of reckoning on interest rates for corporates and investors has again been delayed. The coming year is therefore set to see a further extension of the property cycle, offering investors another chance to get their portfolio into shape ahead of a period of slower growth.’
He added: ‘With a stable, contracted income and exposure to growth and inflation, real estate continues to be incredibly attractive and demand remains strong for the right product. However, defining the right product has become ever harder as powerful, market-moving occupier strategies are reshaped by e-commerce, social and business change, low growth and affordability constraints.’