Cushman & Wakefield’s global property investment outlook – hike in investment activity expected in H2 to give strong finish to 2012

20 Mar, 2012, Prague

‘Despite the currently cautious mood in most global property investment markets, a stronger second half of the year is expected with a potential 20% hike in activity levels forecast, driven by increased confidence and a release of pent-up investor and tenant demand.’ according to Cushman & Wakefield’s latest research, the International Investment Atlas 2012.

Cushman & Wakefield anticipate volumes for the year to be little changed overall on 2011, at EUR 568bn to 576bn but within this total, a potential 20% increase between the first and second halves of the year is expected, with activity picking up due to stronger demand as well as increased investment supply resulting from bank loan sales and recapitalizations.

“The Eurozone crisis is clearly not going to fade quickly. No one knows yet how the sovereign debt crisis will play out and what’s more, if 2011 taught us anything it is that some of the biggest challenges of the year may not yet even be known. As a result, investors should recognise that risk management requires diversification and not just core holdings in low risk markets,” says James Chapman, head of Capital Markets at Cushman & Wakefield Czech and Slovakia.

EMEA – choice of markets widens for low risk investors in 2012

EMEA investment rose 14% in 2011 to EUR 144.1bn with Central & Eastern Europe up 76% and the West up 8%. However while investors were less risk averse earlier in the year, a strong focus on core, stable markets returned by the year-end as the sovereign debt crisis escalated. The indebted fringe of the Eurozone (Greece, Ireland, Italy, Portugal and Spain) saw a 26% fall in investment over the year – while the rest of the Eurozone saw volumes rise by 17% – and it also suffered in pricing terms, with prime yields moving out by an average of 0.37%.

“Investment volume in Central Europe and especially the Czech Republic exceeded expectations. This reflects the change in mindset amongst investors both towards the Czech Republic and towards real estate as an investment class. The dramatic increase in volume compared to 2010 was the result of pent-up demand that had been extremely cautious in 2010. Confidence returned in 2011 and deals started flowing again. We expect that this will continue in 2012 as the Czech Republic follows Poland as increasingly core European markets. The total deal volume will be hard to match without major portfolios but we anticipate a larger number of individual transactions in 2012 and a more diverse investor base,” said Chapman.

Investor tendencies

With investors seeking security and liquidity, gateway cities will be in strong demand in all areas of the globe according to the report. David Hutchings, Head of European Research, Cushman & Wakefield, said: “London will continue to stand out due to the sheer depth of its market as well as the long term growth it offers but despite it being an Olympic year, it may have to put up with a silver medal for investment, with New York likely to again take gold, benefitting as it does from not just scale but also pent up recovery potential which will be released at some point.”

In Europe, low risk investors will continue to have a wider choice of markets than they realise with the focus on Germany and the Nordics. Elsewhere, Poland is an easy pick to make but a crowded market to buy in and one that really has to be seen as more core than value-add these days.

“We saw a significant amount of retail and industrial investment activity in 2011. Offices featured less than would usually be expected due to a restricted pipeline. However, we expect 2012 to redress the balance with offices taking the largest share of the market. Retail will continue to be a popular investment class due to strong occupational performance although a lack of stock will restrict deal flow,” concluded Chapman.

Global Commercial Property Investment by Region

Source: Cushman & Wakefield, RCA, KTI and Property Data

Investments Volume by Sectors in Czech Republic in 2011

Source: Cushman & Wakefield

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