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Investors Drawn To European Prime Commercial Property

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United Kingdom  Spain  Europe  real estate sector  Greece  Germany  Sweden  Knight Frank  France  Savills  The Netherlands  Chris Bell  Eri Mitsostergiou  European Investment Bulletin for Summer 2011 

Investors Drawn To European Prime Commercial Property

By - Thursday 08 September 2011

Prime commercial property in Europe is still popular among investors, who are continuing to shy away from secondary assets, according to the latest report from Savills. In the firm's European Investment Bulletin for Summer 2011, it revealed that transaction volumes in the commercial real estate sector continued on their upward course during the first half of the year, beating the first six months of 2010 by around eight per cent.

Savills noted that more than 80 per cent of total investment volumes were focused on Germany, France, the UK, Sweden and the Netherlands. Meanwhile, Spain and Greece both saw their levels of transactions drop due to concerns over the countries' debts. Eri Mitsostergiou, from the company's European research team, commented: "Overall investors remain wary of secondary markets amid downside risks to the European economic outlook."

However, Savills noted that in Greece, the government's plans to privatise public assets are expected to draw in investors because "it will involve prime development sites across the country". In Spain, the organisation explained that central business districts are the main area of focus for both international and domestic investors. But it added that yields in the nation are being compressed due to the combination of a high level of demand for quality space and a lack of supply of such assets.

In its report, the company revealed that average yields across Europe have been compressed during the second quarter of 2011, compared to the same three-month period in 2010. Yields for prime office locations in central business districts have been squeezed the most, while those for prime shopping centres are not far behind. Industrial warehouses have seen the least movement in this respect.

Earlier this week, Knight Frank stressed that concerns over eurozone debt is having a "significant impact" on investor confidence and the property sector as a whole. The firm described large differences between markets in prime Western European locations and those considered peripheral. Chris Bell, managing director of Europe for Knight Frank, stated: "With the significant degree of polarisation now in evidence across the continent, it is clearer than ever that Europe is not a homogenous property market." He recommended that both investors and occupiers should "seek best in class advice" if they want to "exploit the potential opportunities resulting from these uncertain times".

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