35
Interest in hotels (33%) has increased compared with last year. This sector proved popular among MENA investors – their second preferred investment product after residential – with Qatari capital and Asian capital from outside EMEA being particularly active in this space recently. Perhaps surprisingly, industrial and logistics came in seventh – in line with last year - despite an increase in volume to €12.2 billion in the first nine months of 2014, up from €11.5 billion in the same period in 2013. Most industrial and logistics investment in Europe continues to be cross-border - especially from the US and, increasingly, Canada, in partnership with local players - and still has limited market penetration of around 10% for Europe as a whole.
MORE DEBT AS COST IS DOWN AND AVAILABILITY UP
A greater share of EMEA respondents (72%) plan to use debt in the future to leverage purchases, up from 59% last year. This figure nonetheless conceals a significant variation across the region, with Western European investors (59%) far less likely to use debt than MENA investors (95%).
The majority (57%) of all EMEA respondents will access debt through direct relationships, while only a few will resort exclusively to financial intermediaries (6%). Also, nearly 60% are planning to pay down debt on assets in their portfolio in the next 12 months.
The vast majority of respondents (92%) think underwriting standards have loosened or remained the same over the last six months and expect little change in the future. Likewise, 66% of all EMEA respondents, and 90% of Western European investors, report that the cost of debt has come down and 80% believe it will either remain stable or decrease further going forward. This is consistent with expectations regarding interest rate movements, with less than a quarter of Western European investors expecting an interest rate hike, against 75% of UK-based investors. The perception that the UK is ahead of Europe in the economic and real estate cycle is further supported by views about yields: 45% of Western European investors see room for further yield compression, whereas only 16% of UK investors think this will be the case.
As an alternative asset class, debt is considered attractive by 34% of EMEA respondents, fewer than last year (48%).
TWO SIDES OF THE SAME COIN: RISK AND COMPETITION
While nearly 60% acknowledge risk is back on and believe that capital is now moving from ‘safe haven’ to ‘risk’ markets, it is telling that almost a third of European investment in H1 2014 was still in London, Paris, Munich and Stockholm. This perception is likely reinforced by new sources of overseas capital, especially Asia, using these markets as entry points to Europe. Similarly, 76% believe that opportunities exist in the global market, but are increasingly difficult to find. Whilst almost 70% believe that we could see another chapter in the Eurozone crisis, only a minority (37%) see the crisis in Ukraine as an impediment for property investment in Europe.
EMEA investors are far more expansive than last year, with 78% planning to increase their investment, up from 61% || Richard Divall
2015 GLOBAL INVESTMENT SENTIMENT REPORT COLLIERS INTERNATIONAL
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