Following a stellar year for European investment, during which the weight of capital going into property was circa 30% above the long-term average, Savills has identified themes for 2015 and suggested hotels, student housing and residential sectors will be 'on the radar' alongside the traditional core sectors of offices, retail and industrial.  The firm is confident that investors will continue to favour real estate in the face of bond markets at a record low and turbulent equity markets as financing conditions become more favourable.

The international real estate advisor suggests, such is the weight of money and contrasting profile of the investors, both risk averse and risk embracing buyers will be active bringing demand for the safest markets and asset classes as well as those non-performing assets released from banks.  The firm reports that whilst some office developments will occur in London and Dublin with refurbishments in Madrid and Milan, limited new supply has left undersupplied pockets with rental increases expected in the submarkets of London, Brussels and Dublin. 

Savills confirms retail investors will be focused towards best performing streets and high streets, where retailers have opened new stores, such as the more affluent markets of UK, France, Belgium and Germany with some interested in the recovery in Spain and development in Poland.  Likewise logistics investors will follow the retailers closely taking into account online strategies with Netherlands, Germany, Poland, UK and Spain on the shopping list.  However Savills sees potential in the areas of student housing and residential with strong interest in the hotels markets of London and Paris.  Indeed, 2014 saw transaction volume in the UK hotels market in reach £6.1bn, the highest since 2006.

Marcus Lemli, head of European investment, comments: "Investors will continue to diversify as pricing competition in the prime sector encourages them to consider other markets.  This trend will in turn benefit those markets such as Spain, Ireland and Italy that have 'bottomed out' and in the core markets result in yield convergence between prime and secondary assets in the best areas."

The research paper concludes with a warning on the impact of economic conditions.  Savills suggests if deflation occurs as a result of weak economic growth in the largest economies, confidence will be affected.  This would potentially redirect investors to bond like assets with longer income streams.

Eri Mitsostergiou, director of Savills European research, adds: "Investors will undoubtedly be influenced by economic and geopolitical factors but there is no doubt that 2014 has seen a huge appetite for real estate and there remains a large amount of equity with desire to invest in the market."

distributed by