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Europe looking rather pricey

Alex Hayes 16 May 2018

Alex Hayes


+48 22 356 25 20

Alexander Hayes is currently working as a journalist for Eurobuild Central & Eastern Europe magazine. Originally from the UK, he moved to Poland in 1995 and has been working in real estate for over four years. He has a BA in english literature from the University of Buckingham.

EUROPE According to Cushman & Wakefield’s 'European Fair Value Index' quarterly report there are fewer investment opportunities across Europe.

A total of 123 markets were analysed for retail, office and warehouse investment and using a proprietary metric, each was benchmarked against ‘fair value’, which represents adequate compensation over a five-year hold period for an investor’s risk when purchasing prime assets. In Q1 2018, just 19 pct of the index was classified as ‘underpriced’. Logistics remains the most attractive sector, with 46 pct of the markets classified as ‘underpriced’, and only one as ‘fully priced’.

Moscow remains thebest value for money being ranked first and second for its retail and office sectors respectively. Dublin (logistics) was third with Budapest (retail) and Lisbon (logistics) completing the top five.

Core office markets including London, Vienna and Istanbul are all classified as fully priced having reached their lowest historical yield, with limited yield compression forecast and, in many cases, modest rental growth expectations.

The research shows that Central and Eastern Europe continues to show a good balance of ‘fairly’ and ‘underpriced’ markets while in contrast Germany, alongside the Benelux and Nordics countries have only a few markets ‘underpriced’.

Riccardo Pizzuti, a senior analyst in EMEA forecasting at Cushman & Wakefield, said: “Our findings reflect the fact that we are in the later stages of the property cycle with many markets being labelled as fully priced. That is not to say value or opportunities are not available, it depends on investors’ strategies, but in general there are fewer opportunities to identify mispriced assets. After record quarterly investment volumes of EUR 112 bln in the fourth quarter of last year, prime product across Europe is becoming increasingly scarce as the economic cycle matures. This resulted in the first three months of this year being the slowest quarter since 2014 with EUR 49 bln invested.”

Mark Freeman, the head of valuation and advisory, at Cushman & Wakefield, inPoland, said: “The Key observations are that the Fair Value Index is at 42 pct for Q1 2018, the same level as in Q1 2006, reflecting the advanced stage of the property cycle. Central and Eastern Europe continues to show a good balance of ‘fairly’ and ‘underpriced’ markets.”

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