Equity strong private investors have become active due to the most attractive yields seen in years, although the overall investment volumes have continued to fall in Q2 2023, while hotels remain a strong asset, according to a report of Arnold Investments.
Since the summer of 2023, investors have been encountering the most diverse array of offers, coupled with the most attractive acquisition terms in years.
In Q2 2023, property investments in Europe reached €24.8 billion, down by 55% compared to the same period of last year due to a combination of factors that included further interest rate hikes and weak economic output.
Arnold Investments’ report shows that prime yields for European office space have risen by 110 basis points compared to the previous year and by 20 basis points compared to the previous quarter, reaching 4.5 %. Yields in the logistics asset class have also increased to 4.9 % (+105 basis points year-on-year), while high-street retail currently stands at 4.45% and newly built residential at 3.95 %.
"The significant increase in investor interest seen since June of 2023 has been fuelled by the most attractive yield levels recorded since 2015," explained Martin Ofner, Head of Market Analysis at Arnold Investments.
Yields have increased in every asset class and across all 10 markets where Arnold Investments is active including Austria, Germany, Hungary, Netherlands, and Sweden.
“The hotel asset class continues to perform exceptionally well and has recorded its strongest first half of the year since 2019, despite challenging conditions. Investors are viewing the European hotel real estate market very positively due to the favorable tourism indicators," said Ofner. This is reflected in the lowest EU-12 prime yield increase among all asset classes, rising from 5.40 % to 5.45 % in Q2 2023.
The company anticipates that yields will reach their peak by the end of the year, closely tied to the further development of the ECB benchmark interest rate. Therefore, investments will pick up in the second half of this year, but a consistent recovery will emerge in data covering next year as well.
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