The Wall Street Journal / October 23rd, 2016
Wall Street Journal reports: The European commercial real-estate market is shifting, with the hottest cities cooling off as investors’ interest in other locations grows.
Real-estate markets throughout Europe saw investors pile in following the 2008 financial crisis. With the European Central Bank and the Bank of England pushing interest rates to historic lows, real-estate returns have become increasingly attractive to investors frustrated by tiny yields in the bond market. The cheap money the central banks were pumping into their economies also fueled the demand for property.
London was a favorite of investors, along with Paris and Germany’s biggest cities. But after years of strong demand pushing up property values in these hot spots, returns are shrinking and investors are pulling back. “Most prime markets in Europe are pretty fully priced. There’s no easy money around” in them, says Walter Boettcher, director of research at property broker Colliers International.
Overall, European commercial property investment was €43.7 billion ($47.5 billion) in the first nine months of this year, down 30% from the same period in 2015, according to real-estate research firm Real Capital Analytics. The U.K. led the decline, partly because of caution among investors both before and after Britain’s vote to leave the European Union. Germany and France also saw significant declines.