Europe Property Investors Rediscover Risk Appetite

Wednesday, 6 Mar 2013 | 2:10 AM ET
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European property investors are regaining their appetite for riskier assets, as fears over the euro zone's economic stability ease and sought-after properties in the best neighborhoods become too expensive, a survey showed.

Property consultant CBRE Group said on Wednesday its annual survey of 362 investors, including some of the world's largest property funds, showed that more investors are looking to buy so-called good secondary or value-add properties that need refurbishment, than last year.

In response to a question on what type of properties they were attracted to, more than 40 percent of respondents said they were keen to purchase assets in both categories in 2013. Last year only 35 percent said they were keen to buy good secondary while just over 30 percent said they wanted to buy value-add properties.

"There is now significantly greater interest in opportunities further up the risk spectrum," said Peter Damesick, CBRE's head of European research.

"The next 12 months could mark the beginning of a reversal of the strong polarisation that has characterised European property investment markets over the past two years," he said.

Investors shunned riskier properties in recent years, such as older offices with less financially stable tenants, as the euro zone entered recession and grappled with a debt crisis. They flocked instead to safer bets in the region's capital cities such as London and Paris.

Yields - the annual rent as a percentage of its overall value - have since hit record lows on some prime properties, while concerns over a possible euro zone break-up have waned after strong action from the European Central Bank removed the danger of a financial meltdown.

The survey also pointed to higher deal volumes in the coming year, with close to 60 percent of respondents expecting their purchases to be higher in 2013 compared to 45 percent last year. Some 71 percent said they expected to make more purchases than sales, compared to 61 percent in 2012.

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