According to international real estate advisor Savills total European investment volumes will reach approximately €175 billion in 2014, up 20% on last year's total and 28% higher than the eight year average. All markets are forecast to be up on 2013 volumes.

Marcus Lemli, head of European investment, comments: "We saw a very notable recovery in the first three quarters in peripheral markets, including Greece, Spain and Ireland, where we saw investment increases of 390%, 211% and 120% respectively. In these markets volumes were underpinned by the disposal of properties by the public asset development funds such as NAMA in Ireland, SAREB in Spain and HRADF in Greece as well as increased activity by the recently created REIT structures like SOCIMI's in Spain.

"In spite of the renewed investor interest for peripheral countries we expect the UK, Germany and France to account for more than 70% of the total investment volume at year-end."

Savills reports that the Scandinavian countries also performed well, with Sweden investment volumes up 125% yoy and Finland up 156% yoy, as investors gradually began to move beyond core markets in search of higher yields and cyclical improvements.
Savills predicts yield compression will continue into 2015, with the average prime CBD office yield already forecast to be approximately 5% at the end of 2014 which is 40bps lower than Q4 2013. Average non-CBD office yields are also moving in and in Q3 were at 6.5%, which is about 30bps lower than Q3 2013.

Savills found that in a search for strong yields and due to tight supply in capital markets, some investors also favoured several regions in core countries. In Germany for instance, the firm reports that the share of investment outside the top six markets increased significantly over the last 12-18 months and accounts for 55% of the investment activity this year compared to 50% in 2013. In the UK, Legal & General purchased and forward-funded the development of the first phase of Aberdeen International Business Park for over €162 million representing a yield of 5.75%.

Eri Mitsostergious, head of European research, adds: "The shift towards the regional markets is a very interesting development and one we expect to continue throughout 2015. We believe the markets outside London and the top six German cities will continue to attract investors as well as regional markets in The Netherlands and France, particularly as part of portfolio transactions. In addition, we predict we will continue to see strong appetite for mega deals over €100 million from cross border investors, wealthy individuals, family offices, sovereign wealth and private equity funds."

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