According to the latest insights from Colliers International, investment activity in commercial property in Europe is expected to rebound to reach €100 billion in Q4, following a robust turn-around in larger, post-COVID deals in Q3. This would take investment volumes for the whole year to around €270 billion, only 14 per cent down on activity in 2019, provided smoother waters prevail and the market isn’t further shocked by external geo-political or macro-economic factors.
Andy Thompson, Head of Investment for Czech and Slovak republics at Colliers said: “I think that in most of the institutional quality, sectors and sub-markets, almost any real estate transaction completed now has a high probability that it will look cheap in 18-24* months’ time from a yield perspective. *Barring a significantly deeper and longer recession than currently expected (in which case a number of other investment media will also be negatively impacted).”
“The majority of the stronger macro forces that have been driving pricing upwards over the last five years in most sectors are going to be even more significant over the next few years. In addition to that, in the Czech Republic, there are several local dynamics also pushing in the same direction (e.g. limited supply). The ultimate value will depend on how well the asset can be managed and whether it can retain or improve its income stream,” added Thompson.
The publication of Prevail & Prosper, Colliers’ latest report on capital flows and CRE hotspots across EMEA looks at how the investment market is responding to the ways in which cities and sectors have reacted to the pandemic. It also explores how different city markets and capital destinations are positioned to benefit from the ongoing economic and investment market recovery that has picked up speed in Q3 2020.
Highlights from Prevail & Prosper include:
Richard Divall, Head of Cross Border Capital Markets, EMEA explained: “Over Q3, sentiment and liquidity in the markets has improved, with larger transactions happening throughout Europe. As we enter the final quarter of the year, we are expecting to see a spike in volumes, as investors look to deploy some of their ‘dry powder’ and sellers become more confident with the depth of buyers and liquidity in the markets.
“Property sectors such as logistics, affordable residential, science parks and healthcare continue to attract more demand with investors taking caution and becoming highly selective in the other sectors. Of course, the market is still fragile, and external factors could send the market back into turbulence, including the US Election in November, and a second wave of the pandemic in Europe. However, if this can be avoided and smooth waters prevail, we could see investment volumes reach over €100 billion in Q4, doubling those of Q3 and Q2.”
Author of Prevail & Prosper, Damian Harrington, Head of EMEA research at Colliers Intonational concluded: “On the whole, activity across the region has been positive from an investment perspective – in relative terms – with overall H1 volumes only down by 10 per cent year-on-year. The anticipated rebound in Q4 would take EMEA to only 14 percent down year on year. While the second half of 2020 heralds the start of a recovery from the sharp lockdown-induced economic slump of Q2, the way in which markets are achieving a new normality continues to differ significantly by sector and by location.
“Depending on what side of the fence you sit, the market presents a bitter-sweet picture – bitter; if you’re holding a problematic asset in the wrong location, or sweet; for those with a war chest looking to seize opportunities or those able to sell logistics assets and portfolios at a premium.
“Whilst the recovery is positive, the immediate large ‘partial-V’ or ‘Swoosh’ rebound is over and national economies are facing a stealth position to get back to par. A K-type recovery of rebound-ready sectors, and those due to take a more protracted recovery, looks set to persist. Equally, the balance of factors influencing this recovery remains on the downside for now. As we’ve seen with the recent UK government announcement national governments need to balance-out measures that contain the virus by reducing mobility, whilst sustaining the economic recovery.”
Sign up today for the latest news