Finance hubs top Europe's secondary cities list

Key cities in Europe’s secondary locations have all seen increased investment activity in the first six months of 2019, according to new Savills research, due in part to their status as financial centres.

High achievers in the latest report include Prague (+124%), Warsaw (+119%), Stockholm (+46%), Berlin (+37%), Dublin (+26%), Athens (53%) and Milan (+16%).

Although prime office yields have stabilised in 58% of the markets, they stand at 4% or lower in almost all markets, with the exception of Lisbon (4.25%), Warsaw (4.5%), Manchester (4.75%), Athens (6.25%) and Bucharest (7.15%). This verifies investor interest whilst highlighting the desire for higher returns.

'Against a backdrop of decreasing investment volumes across Europe as a whole, we are seeing a number of new cities outperforming traditional hotspots across all markets,' said Eri Mitsostergiou, director in the European research division, Savills.

'With some cities still above the 4% yield mark for offices, it will be interesting to see just how quickly they join those locations where yields now sit below the 4% mark,' Mitsostergiou added.

Retail trends
In relation to other sectors, Athens, Warsaw, Lisbon and Bucharest are the only markets where shopping centre yields moved in by 25bps y-o-y. In all other locations, shopping centre yields remained stable or softened by 10-25 bps – London and Paris saw yields rise by 50bps and 75bps respectively as online retail continues to disrupt the sector.

In close relation to this, logistics yields are therefore compressing fast across all European markets, Savills said, an average on -47bps y-o-y this quarter, as demand soars for strategically-located warehouses.

Marcus Lemli, head of investment for Europe, Savills, added: 'Despite unprecedented global liquidity driving demand for real estate in Europe, limited availability of quality product coupled with investors holding onto assets for longer, is restricting activity.

'This has meant investors have begun turning their attentions to these secondary markets in which yields are more attractive. This is a trend we expect to see continue as we push on into H2.'

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