The consulting firm has presented the report European Research: European Themes 2021, which analyzes the best investment options in the European real estate sector in 2021 for the different core, value add and opportunistic profiles.
For core profile, the report highlights that convenience retail and last mile logistics assets in densely populated areas, along with logistics warehouses in markets with high or increasing ecommerce penetration, such as Spain, France, Germany, the Netherlands, the Nordics and the UK, will continue to be attractive for core and core plus real estate investors.
This profile will continue to maintain interest in prime offices in key locations in the various financial districts with low availability in Europe, such as Berlin, Munich, Paris, Stockholm and London. «In Madrid and Barcelona offices, in 2020 core and core+ accounted for 80% of the total transacted and 72% of the total investment was cross-border capital. The trend will continue in 2021,» says Carlos Ruiz-Garma, director Capital Markets South Europe at Savills.
Multifamily residential assets in established rental markets in undersupplied cities and regions, such as the Randstad (Amsterdam, Rotterdam, The Hague and Utrecht) in the Netherlands, Stockholm, Paris, London and multiple German cities, will also remain key assets for more conservative investors.
On the other hand, the main opportunities this year for value add investors are: logistics investments in undersupplied markets, such as the Nordic countries and Spain; short-term income sectors, such as flexible offices and student residences, as they are likely to recover in the second half of this year; and, finally, multifamily developments in markets with growing rental demand, such as in Southern and Eastern European countries. As Carlos Ruiz-Garma explains, «the situation of the Spanish market is of great interest in the European real estate context, where the shortage of rental housing makes it particularly attractive for the development of residential rental projects. Large cities and their metropolitan areas are being the focus of investment by institutional funds that have seen a lot of long-term potential in this market».
Savills Aguirre Newman also points out that another of the most noteworthy investment opportunities on the continent is the refurbishment of buildings with the aim of meeting current sustainability criteria. This is because some European countries have introduced stricter environmental building standards in recent years.
Also, according to the report, this year opportunistic investors will value the conversion of offices in secondary areas into residential assets and the purchase of distressed hotel assets in the most touristic destinations.
Likewise, the European Research report highlights as good investment opportunities in Healthcare and Senior Housing in countries with an aging population and available assets such as Belgium, Finland, France, Germany, Sweden and the Netherlands. «In Spain, due to the evolution of our demographics and the incorporation of a different generation -the Baby Boomers- to the over 65 population sector, senior living or housing for the elderly in good health is going to grow substantially in addition to Healthcare. Both asset classes are in the focus of highly specialized international investors who are already entering our market,» explains Ruiz-Garma.
In addition, data center markets with very strong infrastructure and fundamentals are likely to remain attractive this year. Another major opportunity reflected in the study for this year 2021 is science parks in major European university centers.
«The majority of investment is expected to focus on core and core plus product at least until the end of this year, but we also expect to see a new wave of capital targeting opportunities that may arise from any new distress signals. However, the ‘middle ground’, which is the value add segment, has had some stagnation,» says Marcus Lemli, managing director of Savills Germany and head of Capital Markets Europe at Savills. «In the coming months we should start to see owners becoming more realistic about their assets. As pricing becomes more transparent, this should encourage more product to come to market, unlocking liquidity,» he adds.
The report also notes that developers are looking for alternative financing, as financing conditions remain tight. In this regard, Eri Mitsostergiou, director of Savills European Research at Savills notes.
