Rasheed Hassan, head of cross border investment at Savills, picks prime offices in Amsterdam, logistics in Warsaw and bulky goods retail in the UK as great value plays for Asia Pacific investors.

Prime offices in Amsterdam

Despite the economic uncertainty caused by the prospect of Britain’s departure from the European Union, landlords in the Netherlands have already benefitted from some Brexit effects.

The European Medicines Agency has agreed to bring 900 staff to Amsterdam when it relocates next year to a purpose-built headquarters. Up to 250 companies including Japanese electronics firm Panasonic and television company Discovery are planning to relocate or open subsidiaries in the Netherlands over the next few years.

“Most of the Asian investors we speak to still prefer offices as an asset class because the lot sizes are large,” says Hassan. “They are looking for European gateway cities with high liquidity and good transparency. At the moment Amsterdam ticks all of those boxes and its location in the Eurozone means that investors also benefit from cheaper borrowing costs.

Hassan says yields remain relatively low at around 3%, however the office leasing market is buoyant, with low vacancy of 5.8% and Savills predicts 5% rental growth for 2019 and 2020.

Logistics in Warsaw

The increase in internet shopping around the world is driving investor interest in logistics property. Poland’s strategic location between Eastern and Western Europe means that the country is benefitting from the growth in internet-driven goods traffic across the continent.

As a result, Poland’s logistics sector is currently enjoying record high take up, a well-balanced level of modern supply and strong rental growth prospects.

This means that although yields for prime logistics property in Warsaw have fallen to around 6.5% and yields for exceptional long leased assets are trading at below 6%, pricing is still more attractive than similar properties in Western Europe.

“The large scale Asian investors we are currently talking to have been investing in European real estate for a long time now,” says Hassan. “Many of them feel comfortable putting money into sectors such as prime Polish logistics because of the strong projected growth and because the yield makes them interesting.”

Prime UK bulky goods retail

The growth in internet shopping has brought about huge changes to British retailers and contributed to the failure of major high-street retail brands including Woolworths and BHS.

However, Hassan says shoppers still favour small out-of-town retail parks selling bulky goods or value foods, making them remarkably resilient to the current retail woes and consequently underpriced. He estimates yields in this sector currently stand at around 6.25% while vacancy rates remain low.

“In spite of relatively low economic growth prospects compared to other European markets, the UK property market remains the most mature of all, with generally long leases. It is highly liquid and transparent which appeals strongly to overseas investors,” he says.

Further reading:
Savills Netherlands
Savills Poland
Savills UK Retail