Berlin and Hamburg forecast as Top European Markets for 2016

‘Emerging Trends in Real Estate Europe 2015: Beyond The Capital’, a forecast published jointly by ULI and PwC, has suggested that the changing demands of occupiers and rapidly developing technology, demographics, social changes and increased urbanisation are all affecting the European real estate value chain.

These factors have all contributed to investors focusing primarily on cities and assets, as opposed to countries. Investors are also demonstrating increasing interest in alternative sectors that have benefited from these social and demographic shifts, including healthcare, hotels and student accommodation.

41% of respondents affirmed that they would consider investing in alternative sectors, in contrast to a mere 28% in the previous year’s survey. Main street retail and logistics sectors are equally expected to fare well considering both technological advances and improving economic conditions.

Development is also expected to create value, with 78% of respondents citing it as an attractive method of acquiring assets. More progressive investors and developers are innovating in an attempt to meet the needs of increasingly informed and demanding occupiers.

ULI Europe CEO Lisette van Doorn observed that “investors are getting more creative in trying to access prime assets at reasonable prices through more focus on alternatives and development.” She also noted that “they take more risk in the short-term to fulfil their objectives for core assets. At the same time, more and more players in the real estate industry are starting to address the needs of occupiers, who are seeking harmony between their workplaces and their lifestyle needs. Some of the industry’s biggest challenges right now are hot to become less about brick-and-mortar and more about service, and the implications this may have for the traditional business models of real estate operators.”

“Low interest rates, and the weight of capital bearing down on European real estate, mean that most remain bullish about the industry’s business prospects in 2016,” said PwC director Gareth Lewis. “But they acknowledge that the global field for real estate is increasingly competitive, and if the current wall of capital recedes, there will be an even stronger focus on underlying market fundamentals, active asset management, and operational skills.”

According to this report, the leading European city for investment prospects in 2016 is Berlin. This is followed by Hamburg, Dublin, Madrid and Copenhagen. Many respondents expect the German capital to thrive well beyond 2016 due to both its young population and its reputation as a technology and cultural centre. Available land for development is also seen as a promising factor.
It is noted that London is no longer part of the top ten, suggesting that investors are spotting better growth prospects in regional U.K and European cities for the short-term duration.

However, in the long-term, the UK capital remains the first choice in Europe for many international advisors focused on wealth preservation with liquidity and the scale of the market, combined with relatively robust economic performance.

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