European commercial property investment market seen as attractive

April 16, 2015 Updated: April 23, 2016

Knight Frank recently reported that the investment market of European commercial property experienced a strong quarterly end at the close of 2014. In addition to that, they believe that general outlook for the market is high for 2015, which is due in part to the ECB’s (the European Central Bank) recent decision to create a quantitative easing programme meant to keep the high yield premiums of property high rather than have the market rely simply on government bonds, a programme which was outlined in the announcement they made just in January of this year.

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The final quarter of 2014 has been the strongest European commercial property quarter since Q2 2007. The final total was €57.9 billion, with totals for the entire year at €177.6 billion, which marks a stunning 21% increase over the previous year. 

Knight Frank goes on to say that a variety of sectors and non-core locations have been targeted recently as well, which is believed to be because of an overall greater appetite for risk taking that investors in the market have been showing. Speaking to commercial and residential real estate site European Property, it’s clear that investment in overseas property in 2014 was very healthy throughout a variety of European countries, as investment volumes were shown to greatly increase in the Netherlands, Spain, Ireland, and United Kingdom, while the Portuguese market, which has been going through tough times in recent years, is showing some serious recovery.

This new strength has been significantly strengthened even though there are currently varied and modest trends in occupier markets. For example, the office take up fell in 2014 in places such as Moscow, Vienna, and Frankfurt, even though it increased in Berlin, Paris, and London. Though overall, the only significantly sized markets to record prime office rent increases in 2014 were Lisbon, Dublin, and London with a modest 0.8% increase in the Knight Frank European Prime Office Rental Index.

Knight Frank goes on to say that they believe, due in part to the European Central Bank’s new quantitative easing programme, that the momentum will stay consistent and result in a strong year for 2015 as well. The new programme could significantly aid in preserving the overall attractiveness of property as a strong asset class throughout the year and beyond because of how well it widens the spreads between bond yields and property. Overall, this is great news for anyone involved in the European commercial property investment market that should hopefully prove even more fruitful the further we get into 2015.