Emerging Trends in Real Estate (2020) - PWC

Emerging Trends in Real Estate®
Climate of change
Europe 2020
Europe 2020
Climate of change
A publication from PwC and
the Urban Land Institute
Front cover image:

La Défense, Paris, France
Image: Milan, Italy

Contents
4 Business environment
22 Real estate capital markets
34 Markets to watch
74 Getting smart about mobility
We are doing more of what we think of as low

risk – more on the core-plus and value-add side
rather than opportunistic. But markets are active,
liquid and functioning quite well.
Director, global investment bank
Emerging Trends in Real Estate® Europe 2020 1

Executive summary
“You have still got equity markets signalling a Europe’s property leaders remain resolute
reasonable level of investment returns. But bond in their belief in real estate as an attractive
markets are signalling a collapse into recession. The investment asset class despite strong
political and economic headwinds.
two just don’t reconcile. So, I think Europe represents
significant challenges.” The threat of a global recession,
escalating trade tensions between the US
Director, global investor and China, and continuing uncertainty
over Brexit have all clouded sentiment
among Emerging Trends in Real
Estate® Europe’s survey respondents
and interviewees.
There are consequently question marks

against the European economic outlook
for 2020 although the industry draws
comfort from central banks’ decision
to maintain or cut interest rates – a
significant change in direction from last
year’s report and already a big boost
to investment.
The shift in monetary policy has led to

cap-rate compression in some office and
logistics markets during 2019 and raised
the possibility of further value increases
to come in 2020. But secure, stable
income remains the guiding light for the
majority of the industry, especially this
late in the cycle.
With interest rates set to stay lower

for longer and bond yields in many
European countries in negative territory,
real estate income retains its broad
appeal to investors. Equity and debt are
expected to remain plentiful for most real
estate sectors. The notable exception
is retail, still struggling in the face of
online competition.
Yet there is little evidence of complacency

given the inherent risks in a late-cycle
market where values are above historic
levels. Market participants are therefore
being more careful than ever about how
and where they deploy capital, which for
many means focusing on cities that offer
liquidity and connectivity.
Image Apple Store, Piazza Liberty, Milan,

Italy (Nigel Young / Foster + Partners)
2 Emerging Trends in Real Estate® Europe 2020

At the same time, rising labour and In terms of sectors, logistics once In traditional real estate speak, this
material costs have added to the risk again tops the rankings for investment means that increasingly the industry
associated with development – the and development prospects. Though believes operational risk is one worth
primary industry concern for 2020 is some industry players are put off by taking to achieve target returns. The
the cost of construction. high values here, the majority favour latest survey and interviews suggest a
this sector where supply cannot blurring of sector boundaries as part
Political risk is a constant concern keep up with the changing patterns of a bigger investment picture in which
for interviewees, but environmental, of consumer demand. There is still mixed-use assets, improved transport
social and governance (ESG) issues seen to be lots of room for growth in connectivity, greater use of technology
have perhaps shown the biggest e-commerce in continental Europe. and smart mobility solutions are all
move up the industry agenda over seen as integral to the economic
the past 12 months. While ESG has The same bullish sentiment holds true growth of Europe’s cities and the
been an important reference for years, of residential despite a new regulatory investment potential of real estate.
this survey and interviews suggest threat to rental housing – rent controls
a meaningful change of tone. Most – in several cities across Europe. Acute
obviously, this change has come from supply shortages are still proving a
the pressure exerted by institutional compelling reason to deploy capital
investors through their ESG investment into residential, which in its various
criteria. But it has also come via forms dominates the investment
developments at the product end of rankings for 2020.
the business – as we see opportunities Uncontrollable events
emerge in response to changing With a number of real estate sectors like Brexit or escalating
undergoing significant structural
customer demand for real estate that
change it is hardly surprising that trade tensions can
provides a better overall impact.
many interviewees regard investing make meeting target
Against all of those criteria, Paris in “anything related to a bed” as a
is ranked Number 1 for its overall sound, defensive strategy at this
returns difficult, but
real estate prospects in 2020. The point in the cycle, supported as they in these scenarios all
Grand Paris project, Europe’s largest are by long-term urbanisation and investors are in the
transport scheme, is widely lauded as demographic trends.
a game-changer for the French capital,
same boat. We expect
setting it apart from the competition. As Emerging Trends Europe has to be net buyers: in
highlighted over the past few years,
Berlin, Frankfurt, Munich and these sectors are at the forefront of
the continuing low-
Hamburg all figure in the top 10. The the industry’s transformation into bond-yield world real
fundamentals of these markets are becoming a service industry. There is estate allocations
judged “quite healthy”, overriding a recognition that, for all the inherent
concerns over Germany’s economy. self-protectionism that the traditional are increasing.
Similarly good supply/demand view of real estate supports, the
dynamics are working in the favour of industry sector that funds, builds and Real estate head, global
investment manager
other top 10 cities, such as Amsterdam operates the space in which we live,
and Madrid. work and play, is starting to embrace
complexity and respond to its true role
At Number 4, London’s prospects as part of society’s infrastructure.
are highly rated, too. The interviews
indicate a large volume of capital
waiting for a Brexit resolution before
moving in, although there are lower
expectations for the UK’s smaller,
regional cities.

Chapter 1
Business environment
“The market is something of a paradox. The world is not a
happy place at the moment, but it might not be such a bad
place for investors and real estate.”
Director, global investment manager
Image: Pedestrian walkway to Granary

4 Emerging Trends in Real Estate® Europe 2020 Square, King’s Cross, London, UK
Political and economic Central banks have responded by
uncertainty clouds the outlook reversing the rising interest rate policy
for Europe in 2020, and yet of a year ago – for many interviewees
investors remain drawn to the the most significant intervention since
last year’s report. This lower-for-even-
income-generating attributes
longer monetary phase has been,
of real estate. as one private equity player says, “a
shot in the arm” for real estate capital
Values are high, but the
For many of Europe’s real estate markets, with the notable exception underlying European
leaders, the sector’s continuing of retail. A global fund manager adds: economy is still doing
attraction over other investment “Last year, investors hesitated; this year
asset classes is the determining they come with more conviction.”
very poorly. As a result,
force for good. However, there is an you have to have high
undeniable mood of caution across On the other hand, counters another capital values to access
the industry given the darkening global player: “Values are high, but the
macroeconomic picture. underlying European economy is still pretty poor cash flows.
doing very poorly. As a result, you have
The survey and interviews for Emerging to have high capital values to access
Trends in Real Estate Europe have been pretty poor cash flows. The interesting
conducted amid an escalating trade war thing is what’s going to trigger a
between the US and China, continuing realignment of the market?”
uncertainty over Brexit and the major
European economies struggling for
growth. Expectations of a global
economic slowdown are widespread.
Figure 1-1 Business prospects in 2020
Business confidence
2020 21 63 15 %
2019 25 62 13 %
Business profitability
2020 31 49 20 %
2019 37 48 15 %
Business headcount
2020 41 50 9 %
2019 45 46 9 %
0 10 20 30 40 50 60 70 80 90 100
Increase Stay the same Decrease
Source: Emerging Trends Europe survey 2020

Chapter 1: Business environment
The possibility of a recession or

Figure 1-2 Social issues in 2020
downturn is never far from the thoughts
of interviewees and respondents to International political instability
Emerging Trends Europe’s survey,
23 58 11 7 1%
underlining the sober, late-cycle mood
across the industry. Their cautious Environmental issues
outlook for business confidence and 23 44 22 9 2 %
headcounts is little changed from last
year, but they are expecting a marked National political instability
slide in profits in 2020. 21 38 14 19 8 %
Housing affordability
With the European Central Bank
returning to quantitative easing from 17 44 22 14 3 %
November 2019, capital is expected
European political instability
to continue targeting European real
15 55 17 12 2 %
estate in 2020 but without removing
the industry’s doubts over the Mass migration
underlying economy. 8 29 34 24 5 %
“There are plenty of huge question Social equity/inequality

marks on the macroeconomic side,” 9 41 25 19 6 %
says one pan-European adviser.
“But in terms of real estate, we have 0 10
Very concerned
20 30 Somewhat
40 concerned
50 60 70
Neither/nor
80 90 100
never seen so much liquidity in the Not very concerned Not at all concerned
market in Europe. It’s very strange and
slightly dangerous because it seems
there is little correlation between
economic fundamentals and the level
of uncertainty on one hand, and the
volume of activity.”
Nor has the monetary policy shift

alleviated the industry’s prevailing
preoccupations for several years – the
increasingly challenging search for
income amid fierce competition for
core assets and correspondingly high
pricing. All of this is playing out uneasily
over a prolonged late property cycle.

Political risk rises “One of the things that has me most
worried is politics,” says a pan-
European fund manager. “Populism
Politics also looms large across the leads to a lot of unpredictable and
market. “From our conversations ultimately potentially self-harming
with investors we know that political
We don’t believe we’re at uncertainty in the form of growing
actions. But many of them are short-
term beneficial, as we’ve seen in the
the end of this investment populism is weighing on their minds, United States. You don’t need to
cycle, but we do think it even if it hasn’t affected long-term have a long-term perspective if you’re
values,” says a global investment
makes sense for most manager. “We don’t believe we’re at the
a populist.”
investors to look for more end of this investment cycle, but we do This is true of public policy on housing
defensive positions. think it makes sense for most investors shortages across Europe. Industry
to look for more defensive positions.” concerns over housing affordability are
rising, but the interviews also reveal
When it comes to social/political issues widespread frustration with state and
in 2020, international and European local authorities imposing rent controls
political instability are rated key as a way of dealing with the problem.
concerns by 81 percent and 70 percent In the eyes of many interviewees this
of survey respondents respectively. is counter-productive, adding political
Nearly 60 percent are concerned risk to the sector while discouraging
about national politics – a sharp rise on new investment.
last year.
As one global investor warns:
It is impossible to dissociate politics “Regulation is always a risk even
from another critically important subject though it has been shown to suppress
– the environment – which has, as one the supply of housing and make the
investment manager puts it, “moved shortages worse, not better. It’s popular
to a different level of risk” since last with politicians because it’s this freebie
year’s report. Over two thirds of survey handout that they can give to their
respondents are concerned about the current constituents, who are renting
impact of environmental issues on apartments. But it will impact the
their business in 2020. “We have talked growth of their cities.”
about climate change for some time,
but the risk has become more severe,” As expected, Brexit and trade wars
says a German CEO. “It affects how you remain major issues, widely seen to
build, how sustainably you build. What have far-reaching consequences for
is your energy cost?” European real estate. “Scrappy politics
is creating uncertain, deteriorating
The political backdrop to investment economics,” says a pan-European
has been on the minds of Europe’s player, perfectly summing up the
property leaders for years. The industry view of the UK and the lack of
difference now is that political issues resolution over Brexit. “It would be quite
are acting as a drag on economic and gutsy to invest in London over the
real estate performance as well as coming year,” says a German institution.
business confidence.

Facing up to Brexit
Some 70 percent of Europe’s Figure 1-3 Business impact of Brexit in 2020
senior property professionals
believe that the UK’s ability %
to attract international talent Business
relocations
will fall following Brexit, to the rest
1 3 24 65 7
while the same proportion of Europe
expect business relocations
to continental Europe will
increase in 2020. The UK’s
ability to
attract 18 52 25 41
Though marginally better than last international
year’s, these numbers nonetheless talent
reflect the depth of concern over the UK
economy that the industry shares with
the wider business community. Decrease substantially Decrease somewhat No significant impact
Increase somewhat Increase substantially
The survey was conducted in mid-2019
when the industry was bracing itself Source: Emerging Trends Europe survey 2020
not just for the UK’s departure from the
European Union but the prospect that The interviews suggest that Boris However, not everyone is convinced
a hard Brexit might turn into a no-deal Johnson taking over from Theresa May that the European Union as a whole
Brexit. Though the possible departure as UK Prime Minister in the summer will emerge unscathed from Brexit.
has been put back until January has done nothing to alleviate the largely “Even though the political uncertainty
2020, the majority of respondents “risk off” attitude to UK real estate. is certainly focused on London and
from both the UK and the rest of “Earlier this year there was an attitude the UK at the moment, to think that
Europe nonetheless believe Brexit of, ‘let’s just get on with it’, because continental Europe is without its
will have a negative impact on the UK we’ve been facing that uncertainty now challenges is just simply being naïve,”
property industry. for a couple of years,” says a London- says one global investor. “Europe
based financier. “But it just seems has economic challenges, political
as if there’s increased concern with challenges. It certainly has long-term
more political upheaval and a change issues to do with the euro, long-term
in administration. People are pausing issues to do with competitiveness, and
a bit longer in terms of committing to values are high.”
doing transactions.”
Indeed, Brexit is a “lose-lose situation”,
For some continental cities, there have according to one German-based
been no such doubts. After the 2016 banker: “No other European financial
Brexit referendum, Amsterdam, Dublin, centre would actually take over
Frankfurt, Luxembourg and Paris all London’s position in general. With
seemed set to win business in one form London outside the largest single
or another from London and the UK. market in the world, not only is the UK
The latest interviews indicate the same losing its title as the world’s leading
cities are already Brexit beneficiaries to financial centre, but also the European
some extent – with more business likely Union won’t have the world’s leading
to come their way in 2020. financial centre anymore.”

In fact, the industry is concerned for
Figure 1-4 Issues impacting business in 2020
Germany, too. Already on the brink of
recession, Europe’s biggest economy Construction costs
is heavily dependent on exports and as
25 42 20 10 3 %
such is considered most vulnerable to
the potential fall-out from the trade war Availability of suitable assets/land for acquisition and development
between US and China extending to %
21 41 22 13 3
Europe. “You don’t feel the impact yet,
but if you speak to bankers, investors, European economic growth
even in this real estate industry, 11 55 19 14 1%
that’s the biggest concern,” says a
German CEO. Currency volatility
9 29 31 22 9 %
One global investment manager
Cybersecurity
believes that as “the narrative in Europe
8 42 30 16 4 %
of German strength, fiscal prudence
and exporting prowess is being rapidly Asset obsolescence
undermined by events”, then the more
7 25 37 25 6 %
domestically focused, consumer-
based economies of France, Spain and Global economic growth
the Nordics stand to gain – “like mini 7 54 21 16 2 %
versions of the US”.
Interest rate movements
According to another global player, 6 25 20 41 8 %
however, the wider impact of trade
Inflation
tensions is “something that we’re
just beginning to accept as part of 4 16 31 38 12 %
the landscape. And I don’t think the Availability of finance
markets are pricing it into most of the
4 15 17 43 12 %
assets that we’re dealing with, which
is probably also a commentary on just
how much capital remains out there to 0 10 20
Very concerned
Not very concerned
30 Somewhat
40 concerned
50 60
Not at all concerned
70
Neither/nor 80 90 100
invest in real estate”.

Either way, fears over European and But this is also because of the scarcity
global economic growth are up sharply of suitable assets – a perennial issue
on last year, signalling a testing period for survey respondents. “For a large
for all occupier markets, not just in part, lower investment volumes are Occupier decisions are
2020 but over the next five years. One due to the fact that the product that is
taking a little longer
Nordic interviewee says: “Typically, the available is often not what the investors
occupier market lags behind the overall want. I wouldn’t say only prime but than they were last year.
economy, but we are already starting good-quality product is increasingly There is more uncertainty
to hear that occupier decisions are challenging to find,” says a pan-
taking a little longer than they were last European investment manager.
about where economies
year or earlier this year. There is more are going.
uncertainty about where economies However, the primary concern for
are going.” 2020 is the cost of construction. It is
another long-standing issue, especially
Though the monetary policy shift has for developers directly bearing the
boosted investment, the downbeat rising costs of labour and materials.
economic forecasts have helped keep This year’s survey suggests that the
a lid on the volume of commercial cost problem is coming into view
property transactions – just 1 percent for the wider property industry, as
up across Europe in the year to 30 many more investors adopt develop-
September 2019, according to Real to-core strategies as a means of
Capital Analytics. delivering returns.
Figure 1-5 European business environment in next 3–5 years
7 8 12 17 18 10 9 11 7 8
36 38 39 34 39 52 55 57 61 70
57 54 49 49 43 38 35 32 32 22
Global European Availability Construction Cyber- Cost of Currency Interest rate Asset Inflation
economic economic of suitable costs security finance volatility movements obsolescence
growth growth assets/land for
acquisition and
development
Improve Stay the same Get worse

Interest rate boost Figure 1-6 Interest rates and inflation in 2020
For all the political and economic

uncertainty clouding European real 1% 2% 1% 3%
10% 18%
estate, for some in the industry this 24% 13%
32%
has been offset by central banks’
37%
move to maintain or cut base rates –
a big boost for investment, albeit not Inflation Short-term Long-term
interest rates interest rates
yet for the underlying economy. “It
is hard to express strongly enough
46%
what an extraordinary turnaround 57% 56%
that has been. The cycle feels like it
is going to go longer. Nothing seems
to be overheating,” says a global Increase significantly Increase somewhat Stay the same
investment manager. Decrease somewhat Decrease significantly

Nearly three quarters of respondents
expect short-term interest rates to
stay the same or reduce in 2020,
while the majority believe inflation Figure 1-7 Eurozone property yields and interest rates, 2010–2019
will hold steady. In the eyes of most
6
interviewees this monetary environment
has reinforced real estate’s attraction 5
relative to bonds and equities. As one 4

private equity player says, “There’s 3
not a significant enough slowdown %
2
in growth to really undermine the
fundamental value proposition that 1
real estate provides, given a negative 0

interest rate environment.” -6
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EURIBOR Eurozone bond yields Eurozone property yields Five-year swap rate
Source: CBRE, Datastream from Refinitiv, European Central Bank
Figure 1-8 UK property yields and interest rates, 2010–2019

8
7
6
5
%4
3
2
1
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
LIBOR UK Government bond yields UK property yields Five-year swap rate
Source: CBRE, Datastream from Refinitiv, European Central Bank

Image: Harbour, Hamburg, Germany
European real estate has been “brought As oneFigure

global1-10
investment manager Figure 1-11
back into focus for a lot of investors Returns targeted inwealth
observes, this “incredible 2020 of Returns tar
Figure 1-9 compared to previous year
Appetite for European versus other asset classes”, and many capital going into the market pushed
real estate in 2020 – but importantly, not everyone – in the down cap rates in2% logistics
2%
and in some 4
industry expect capital to keep being cases, offices, by another11%25 basis 9%
17% deployed. Just over half of respondents points” during 2019.
53%
say they expect to be net buyers of real 53%
estate in Europe in 2020, and nearly Even in highly priced but economically
a third are buying and selling in equal challenged Germany, there is the
measure. But nearly a fifth expect to 32% of more to come. “Since 21%
possibility
30% be net sellers, reflecting perhaps the interest rates are unlikely to rise and
economic uncertainty in this late-cycle may even go down, we see even
market and the risk of a geopolitical Significantly
further yield higher says one
compression,” 0-5%
shock to the system. Somewhat higher
German interviewee. 5-10%
A net buyer Same 10-15%
Buying and selling
similar amounts
“The insurance companies, the Somewhat lower 15-20%
A net seller open-end funds and high-net-worth Significantly lower 20%+

individuals will continue to seek yield
in the real estate sector,” says one
of the more bullish pan-European
It just feels as if we’re
fund managers. “That low interest in a lower return
rate – that force – will drive continued environment for a longer
high allocations to real estate. There’s
a lot of business to be done, still, just
period of time. If there’s
allocating money into core real estate.” no underlying growth
in the markets, rates will
stay low.

Even so, few are relying solely on On a cautionary note, one fund “I’m not totally uncomfortable buying
cap-rate compression. Sustainable manager adds: “This is an environment very core assets at very high prices,
income has been the key objective some institutional players still have to because they will still be there in five,
for institutional investors for several accept because they have their pay- 10, 15, 20 years. They will still have a
years, and 2020 will be no different. out requirements based on historical value depending on cycle, depending
“And that will mean the overall return is higher returns.” on the quality of our management.
significantly lower than what we have But they will be okay,” says one pan-
seen over the last three, four years If anything, the interviews indicate there European manager.
because the income return component is no pre-eminent means of achieving
will come back to something between attractive risk-adjusted returns at this Another pan-European player is even
three and five percent, depending on point in the cycle. “Europe still offers more trenchant in support of core:
the sector,” says one pan-European a huge amount of complexity, a huge “We’ve been unremittingly disciplined
investment manager. amount of diversity,” a global fund on asset quality because most of the
manager suggests. “That means skilful threats to real estate today, when it
Return expectations have been scaled investors can extract higher returns. I comes down to it, are on product that
down over successive Emerging Trends just think you have got to be honest to for one reason or another is going to
Europe surveys, and once again a third your investment committee and your become obsolete. People say core is
of respondents are targeting lower investors about the risks you are taking too expensive, and that may be true.
returns compared with a year ago. Two so they then have the opportunity to But when the market turns, I’d rather be
thirds are pencilling in up to 10 percent offset those elsewhere.” holding the better assets, for so many
risk-adjusted returns in 2020. reasons, than the secondary assets.”
Last year, core-plus and value-
“It just feels as if we’re in a lower return added strategies seemed to prevail There are counter arguments. Investing
environment for a longer period of as investment managers and fund in “everything but core”, one global
time. If there’s no underlying growth managers sought to squeeze higher player says: “These are good times
in the markets, rates will stay low. We returns on behalf of their clients. for people who actually work their real
don’t see that really moving out in the This year, the monetary policy shift estate, who know how to do real estate,
next three to five years,” says a global has helped spark, as one global who are not just expecting cap-rate
investment banker. manager puts it, “a recovery in investor compression and easy money to
enthusiasm for core real estate”. be made.”
Figure 1-10 Figure 1-11 Figure 1-12

Returns targeted in 2020 Returns targeted in 2020 Time horizon for holding
compared to previous year investments
2% 2% 4% 7%
11% 9%
21%
53% 23%
32% 21% 38%
44% 33%
Significantly higher 0-5% 1-3 years
Somewhat higher 5-10% 3-5 years
Same 10-15% 5-10 years
Somewhat lower 15-20% 10+ years
Significantly lower 20%+

And when it comes to development, For others, alternative real estate

the definition of risk is open to investment has been one of the notable
interpretation. The develop-to-core defensive strategies. The survey and
strategy has been a feature of the interviews indicate that the less cyclical
European market for the past few income from the likes of purpose-built
years. Many interviewees still see it student accommodation, healthcare
as a prudent way of securing quality and senior living will remain highly
offices and logistics without paying coveted in 2020.
over the odds. “At this point in the cycle,
and given the secular trends, it’s the Though trending upwards, alternative
right thing to be doing,” says a pan- real estate is still a minority play from a
European manager. short-term capital perspective. “Despite
all of the zeitgeist around alternative
But one global investor active in Europe assets,” says one pan-European
is less sanguine: “In order to get a good investor, “the most liquid product in
margin, in a lot of cases at the moment the real estate sector in Europe today
you have to do development. There remains a newly built, fully let office
is no question it’s riskier. That is what building in a gateway market in a
happens in every cycle: you can no fantastic location. That is where liquidity
longer buy income at measurable levels, resides. I can always sell that building.”
and you are forced into a position where
you have to go up the risk curve. I don’t
like it, but that’s the reality.”
14 Emerging Trends in Real Estate® Europe 2020 Image: Dumbiedykes residential area, Edinburgh, UK
Mobility matters Thus, it is little surprise that Paris tops There is also a reasonable expectation
the 2020 city rankings; the Grand Paris that smart mobility, just like big-
project, Europe’s largest transport ticket infrastructure, can be a catalyst
Many in the industry believe returns – as
scheme, is repeatedly praised by for urban regeneration. “Low-cost
well as market liquidity – can improve
interviewees. Says one: “It will change mobility solutions can make areas that
if they take account of the bigger
the way the city works for good. It is a are currently underserved by public
urbanisation and demographic trends
tangible example of how transportation transport once again accessible,
and attempt to invest through the cycle.
can directly influence investment as an especially to younger people, and
To that end, the boundaries between incubator for new markets.” thus bring additional stock of spaces,
traditional and alternative real estate often more affordable, back to the
are being blurred, as highlighted by One global player and long-time Paris market,” says one interviewee. “This
Emerging Trends Europe in recent investor adds: “Every single decision has the effect that increased interest
years. The significance of alternative we make when we look at an emerging will attract investment and provoke a
real estate is not simply the capital location in Paris is about how the gradual rejuvenation of areas that may
it attracts but the way it has helped new train or metro system will impact be considered unattractive by end
advance the idea of real estate as a that location. Is it going to benefit users today.”
service, and turn practitioners into, residential? Or are we going to create a
as one says, “operators as opposed new office location?” Right now, as one pan-European
to asset allocators”. At the same time manager says: “Mobility is one of the
a blurring of the boundaries between For many of the industry leaders key considerations for the locations in
real estate and real assets – especially canvassed for Emerging Trends Europe, which we invest.”
transport infrastructure – is encouraging the opportunities extend beyond
investors to examine more closely how large-scale public infrastructure. The
their buildings will be used and how consensus is that they need to factor
cities may develop. in the harder-to-define solutions and
cultural changes that are already
Speaking for many interviewees, one “transforming urban mobility”. They
pan-European manager says: “We are also acknowledge that, further out,
trying to bring the infrastructure thought investment needs to reflect the
process and investment activity closer adoption of electric and autonomous
to what we are doing in real estate.” vehicles. “Smart mobility will change
our behaviour when it comes to moving
around quite substantially in the future,”
says a German asset manager.

Top trends
Environmental The interviews suggest the growing Indeed, 26 percent of respondents
public outcry over the effects of climate do not see any material impact from
tipping point change is influencing sentiment in climate change on their portfolio
the industry. That public pressure is today, although around a fifth believe
Climate change is seen as having the translating into a general tightening of it is already leading to greater capital
biggest impact on real estate over the environmental, social and corporate expenditure, higher operational costs
next 30 years, but it is clear that some governance (ESG) requirements among and faster obsolescence.
industry leaders are already rising to the institutional investors.
challenge, not least because they bear “Global climate change is reducing
some responsibility. This tougher ESG regime is in turn the amount of land that’s viable for
being imposed on the real estate habitation and occupation,” concludes
“We have reached a tipping point specialists in those organisations, their one pan-European investor. “Some of
around environmental issues generally, external investment managers and on our most valuable agglomerations of
and 40 percent of global emissions publicly quoted companies. “People are real estate value are in global cities,
are from real estate,” says a pan- waking up to the world’s environmental places that are hugely exposed to
European investment manager. “We issues. Shareholders enquiring about those risks and being transformed on
have ambitious targets around going the environmental impact of our the basis of those risks. And the real
net carbon neutral that will impact how buildings has gone up five-fold,” says a estate market is only just beginning to
buildings are built, used and managed.” UK REIT director. evaluate that.”
Almost half of survey respondents say Some investors are also responding to
the risk of climate change has increased national emissions reduction targets
in their portfolio, and 73 percent expect imposed under the Paris Agreement.
that risk to become greater over the For them, making their assets “Paris-
next five years. proof” overrides short-term political
Shareholders enquiring
and economic concerns. As one about the environmental
Dutch investor says: “The biggest risk impact of our buildings
for us is more the long-term risk – is
your property good enough to deal has gone up five-fold.
with the Paris treaty? But I don’t think
every institutional investor shares our
concerns over sustainability, at least
not yet.”

image: Bosco Verticale, Milan, Italy
Figure 1-13 Current climate change Figure 1-14 Climate change risk on
risk on portfolio portfolio in the next 5 years
3% 11% 3% 1%
23% 26%
49%
37%
47%
Increased significantly Decreased somewhat Increase significantly Decrease somewhat
Increased somewhat Decreased significantly Increase somewhat Decrease significantly
Stayed the same Stay the same
Figure 1-15 Climate change impact on portfolio
No material impact 26%
More capital expenditure 22%
Higher operational expenses 20%
Faster obsolesence 18%
Higher insurance premiums/non-insurabiility 6%
Declining values 5%
Lower liquidity 2%
Increased number of sales 0%

Regulatory risk “That is why we think that residential Similar measures are expected in other
could be potentially exposed to a German cities and beyond. Residential
for residential certain yield shift ... to move out and regulation is one of the common talking
reflect more the political and regulatory points for interviewees active in markets
A lack of affordable housing has been risks investors are facing,” says an as diverse as France, the Netherlands,
highlighted by Emerging Trends Europe investment banker. the Nordics, Spain and the UK.
as a serious problem in many European
cities for years, and there is no let-up A French CEO puts it more bluntly: Though much more wary of the
in sight. “When not enough people have enough regulatory pitfalls than before,
wealth, the easy way to get votes is experienced residential investors still
Some 61 percent of survey respondents to stop rent increases, so politicians inherently believe the long-term supply/
are concerned about housing do it and mess up the market. demand dynamics make housing
affordability in 2020 – sharply up on last Political decisions don’t go with good relatively secure and “defensive on
year – and half believe the problem will management a lot of times.” the downside”.
worsen over the next five years.
So far, Berlin has made the biggest “Rent control is an issue, but it will
With the supply/demand imbalance headlines with a plan to introduce a impact mostly in the first years of
acknowledged as long-term, it is no rent freeze for five years, which has investment,” says a pan-European
coincidence that the industry has already hit sentiment. “The story of player. “If you want to have a real policy
responded by deploying increasing that city is really strong, and we have in residential you know that quite an
amounts of capital into various forms of assets there. But it’s just un-investable important part of your value is not in
rental housing. at the moment, so we’re going to yield but in capital gains, which means
manage what we’ve got and watch for you have to be patient.”
However, several governments across a resolution,” says one longstanding
Europe – mainly at a city rather than residential investor in Berlin.
national level – are also responding now
to the affordability issue with proposals
to set rent controls.
Image: Dortheavej Residence affordable housing

18 Emerging Trends in Real Estate® Europe 2020 project, Copenhagen, Denmark (Bjarke Ingels Group)
Construction costs Two thirds of respondents nonetheless For those intent on development, the
believe that (re)development is the capacity issue – a legacy of the financial
developers dear most attractive way to acquire prime crisis, too – is squeezing margins.
assets. But as one Dutch investor “If yields cannot continue to come
Invariably flagged as a big issue in says: “Development has become down, then obviously, you have to be
Emerging Trends Europe, construction more expensive due to the fact that prepared to have a lower return on your
capacity has been thrown into sharp construction costs have increased investment,” says a German CEO. A
focus this year by those who would dramatically, and buying land is also pan-European investment manager is
pursue a late-cycle, develop-to-core an issue. Develop-to-hold is still a “insisting” on pushing the cost risk back
strategy were it not for rising costs. feasible business model. But let’s say, on to the contractors, but even so “the
percentage-wise, it’s lower today than it vendors are having to understand that
More than two thirds of survey used to be.” this is impacting on site valuations”.
respondents – a higher proportion
than last year – cite increasing A private equity player points to a few An investment manager with a long
construction costs as having the development hotspots around Europe, European development track record
biggest impact on their business in such as Berlin, before adding: “All we concludes: “We are quite cautious at
2020. Interviewees across Europe point generally see are very low vacancy this point in the cycle, especially with
to labour and material costs combining rates but no development response. construction costs rising significantly
for 5-7 percent inflation per annum in And part of that is because there’s not a in many markets. We are more
this sector. huge amount of construction capacity.” likely to reduce risk and unlikely to
pursue speculative development.
Achieving target returns will require a widening of the definition of traditional real estate to
This is a dilemma for investors, who
include real assets and related service businessesWe like income. The bar is higher for
Nor is there much debt, which means
can see that the post-financial crisis Achieving target returns will require a widening of the definition of traditional real estate to
developers must rely on equity. “For risk development at this point.”
include real assets and related service businesses
over-supply has disappeared, much transactions, whether it’s development,
stock needs modernising and sourcing
suitable standing core assets is as
refurbishment, speculative, lending
23%
into vacant or a building that you 48% 21% 8%
expensive as ever. With constraints on know is going 23%
Agree
48%
to go vacant, the debt 21%
Neither/nor
8%
Disagree
1%
1%
Disagree
the development pipeline, however, market remains cautious and Agreerelatively
strongly strongly
there is reassuringly little sign of a new selective. ThereAgree the sponsor is Neither/nor Disagree Disagree
strongly Agree strongly
over-supply emerging. extremely important, and the providers
Use this as "bubble diagram" in Ch 1 - in the final section of the main piece - ie near the crosshead "Mobility matters for real estate
are not that many,” says another private
Use this as "bubble diagram" in Ch 1 - in the final section of the main piece - ie near the crosshead "Mobility matters for real estate
equity investor.
(Re)development is the most attractive way to acquire prime assets

(Re)development is the most attractive way to acquire prime assets
We are quite cautious
at this point in the 21% 47% 23% 7%
cycle, especially with 21%
Agree
47% 23%
Neither/nor
7%
Disagree
1%
1%
Disagree
construction costs strongly
Agree
Agree
Neither/nor Disagree
strongly
Disagree
rising significantly strongly Agree
Use this as "bubble diagram" in the construction costs Top Trend
strongly
in many markets. Use this as "bubble diagram" in the construction costs Top Trend
The bar is higher for

Prime assets are overpriced
development at this point.
Prime assets are overpriced
18% 47% 23% 11%

18%
Agree
47% 23%
Neither/nor
11%
Disagree
strongly Agree
Agree Neither/nor Disagree
strongly Agree
Use as "bubble diagram" in chapter one, with Construction costs Top Trend
Use as "bubble diagram" in chapter one, with Construction costs Top Trend

Technology boost Figure 1-16 Proptech investment / Figure 1-17 Proptech investment /
for business usage in the past year usage in the next 3–5 years
1%
“To be a winner in the next five years 18% 12%
you will need to be faster and smarter,
39%
and being digital is the key to being fast
and smart,” says the director of a pan- 37%
European lender. The industry is largely
following this advice.
48%
44%
Nearly two thirds of survey respondents
have increased the use of technology Increased significantly Decreased Increase significantly Decrease
in their operational businesses over the somewhat somewhat
Increased somewhat Increase somewhat
past year. Nearly 90 percent indicate it
Stayed the same Decreased Stay the same Decrease
will carry on trending upwards over the
significantly significantly
next five years.
These results bear out what Emerging
Trends Europe has signalled in previous
years when many interviewees hailed Many industry leaders view technology Two thirds of respondents may be
technology as a critically important as an enabling force for efficiency users, but they are not actually investing
long-term influence on real estate. It gains, not just for their business in technology despite the perceived
is natural that such sentiment would but in the work they undertake for improvements it can bring to real estate.
sooner or later turn into day-to-day use. clients and occupiers, whether it is Like one Polish investment manager,
building information modelling used they are “wary of spending a lot of
The survey reveals two main ways by architects and developers or data money on something which will be
of harnessing technology – a third of management tools used by investors old in three, four years”. Some believe
respondents are buying products from and asset managers. their scale of operation is too small
third-party suppliers, while a quarter to warrant investment. Others are put
are investing or partnering with start- Expressing a common view, one global off by the confusing array of proptech
up proptech firms. “Originally the idea manager says: “We are investing start-ups out there.
we had was to invest in start-ups and internally in democratising access to
get a return on our money. Now we see our own data and creating operational Perhaps this reflects some anxiety
this as learning money to keep track of efficiencies for the business as well over jobs. As one German lender says:
what’s happening in different segments as better decision-making. Most of “People talk about jobs lost from Brexit,
of the market. All this is part of our core our focus, however, is on our real but a bigger impact will be the role tech
business now,” says one enthusiast estate portfolio and how we can plays and the number of support staff
from the Baltics. use technology within it to drive roles in financial services that become
user experience, sustainability and, redundant. That space might be taken
ultimately, investment performance.” up by the tech companies themselves.”
In any event, there is a consensus that

real estate is nearer the start than the
end of its “digital transformation”. But it
is gathering momentum.

Figure 1-18 Methods of proptech investment
Buying proptech products from

third-party suppliers 32%
To be a winner in the next
Investing in/partnering with proptech
five years you will need to
businesses/start-ups directly
24%
be faster and smarter, and
Investing in proptech businesses/start-ups
5%
being digital is the key to
via the company’s venture capital provider
being fast and smart.
Investing in proptech businesses/start-ups
3%
via a third-party venture capital provider
Not investing 36%
Image: EDGE Suedkreuz Berlin project, Germany (EDGE Technologies) Emerging Trends in Real Estate® Europe 2020 21
Chapter 2
Real estate capital markets

“We’re investing with a recognition that this does all
end. And even if we can’t say when or how, we should be
experienced enough to understand the consequences and
what happens in the unwind when that process begins.”
Chairman, private equity firm
Image: Student accommodation in Castelldefels, Spain

22 Emerging Trends in Real Estate® Europe 2020 (AXA Investment Managers – Real Assets)
With interest rates set to stay Between a quarter and a third think
lower for longer and bond equity and debt will increase in the
yields in many European next 12 months, which is about the
same proportion as predicted for last
countries in negative territory,
year’s increase.
equity and debt for real
estate are expected to remain “There is never going to not be a
plentiful for most of 2020. demand for real estate,” one very
bullish global investor says. “There
That said, market participants are being is $31 trillion of negative yield debt
more careful than ever about how and out there, and you need to find yield.”
where they deploy that capital. They are Consequently, on an overall basis, the
acutely aware that this real estate cycle weight of capital might actually cause
is now more than a decade old and values to rise in prime markets.
prices in many countries and sectors are
at record highs. “When German cap rates compressed
to three percent, everyone felt it would
More than half of survey respondents be hard for them to go much lower, but
believe that equity and debt for in the last six months they have,” one
refinancing or new investment will be the investment manager says. “Can it keep
same in 2020 as in 2019. going? Look at Japan.”
Figure 2-1 Availability of equity and debt in 2020
2% 3% 1% 2% 4% 3% 1% 3%
15% 19% 28%
26% 23% 20%
36%
26%
40%
55% 51% 42%
Equity for refinancing Debt for refinancing or Debt for development Equity for development
or new investment new investment
Increase significantly Increase somewhat Stay the same Decrease somewhat Decrease significantly

Chapter 2: Real estate capital markets
Yet there is little evidence of complacency

Figure 2-3 Impact of Brexit on real estate in 2020
among investors about the risks inherent
in a market where values are above %
historic norms. “The fact is we are
probably getting slightly lower returns
UK 25 51 15 7 1
from the same level of risk,” a private Real estate
equity investor says. “On balance, I am investment
not going to go for more risk at this stage Rest 1 13 43 41 3
to juice returns.” of EU
Not all markets are equal when it comes

to availability of capital. Following a
decline in UK investment volumes in
2019, there is a clear belief among UK 19 60 17 3
three quarters of respondents that the Real estate
downward trend will continue in 2020 as a values
result of Brexit. Rest 1 8 61 31 1
of EU
“People are risk-off on the UK at the

moment for everything except residential, Decrease substantially Decrease somewhat No significant impact
and a lot is going to have to change for Increase somewhat Increase substantially
investors to feel more comfortable again,”
one global investor says. From the point Source: Emerging Trends Europe survey 2020
of view of lenders: “Those assets that

people feel strongly enough to support
are being bid aggressively, but as soon as
you move a few yards from the centre of
the fairway, the brakes go on.”
Figure 2-2 Country transaction volumes Q4 2018–Q3 2019 (€bn)
Finland 7
Norway 6 Sweden 14
3 Russia
Other 4
Denmark 4
Ireland 6
UK 53 Netherlands
20
Czech
Republic 7 Poland
67
3
Belgium 3 2 Hungary
Germany
France 41 Austria 9
2 Luxembourg
Switzerland 6
Spain 20 10 Italy
Portugal 4
Source: Real Capital Analytics

Note: Countries with transactions over €1 billion.

However, the UK is still among the largest With pricing high for existing core assets, “In 2018, 60 percent of our investments
markets in Europe. There is an underlying investors are increasingly willing to look were forward funding,” another
feeling that even in the event of a hard or to development to find higher returns. institutional fund manager says. “There
no-deal Brexit, there is so much capital in The fact that survey respondents feel is a smaller competitive set of players for
the world that values would be supported there is more likely to be an increase in those deals. We do get a premium, but
in the UK by opportunity funds and other equity compared to debt for development even that has eroded to around 25–40
investors quickly stepping in, looking highlights two trends, one cyclical, one basis points at best.”
for bargains. secular: the willingness of institutional
investors to adopt a build-to-core The steady march of alternative real
“For a lot of investors, the UK has been strategy and the pullback of traditional estate sectors has been charted in detail
off limits for a while, but some of the lenders from development finance, which by Emerging Trends Europe for the
private equity guys who have not invested regulation is making less profitable for past five years, and again interviewees
here before are starting to hire teams,” them. are keen to highlight the fact that, with
one adviser says. “If you don’t have a values high almost across the board,
legacy UK book, now is not a bad time to “We are going up the risk curve; we are sectors with demographic support, such
start looking.” supporting development, but we don’t as rented residential in all its forms, are
call it development, we call it build-to- increasingly appealing.
“We are very active in the UK today, and core,” one pension fund investor says.
not everyone is,” one more optimistic “I don’t want to say we are riding up the This thesis is spreading beyond the equity
debt fund manager says. “We are risk curve, but we are looking for resilient sphere and into debt, where lenders
underwriting things that would still be assets and operators that can pick had been more reticent to lend outside
okay and survive if the UK dropped out good locations.” of mainstream real estate. More than
of the G20.” 40 percent of respondents think niche
sectors would see the biggest increase in
availability of senior debt this year.
Figure 2-4 Access to senior debt in 2020
Niche sectors
We are going up the risk
11 32 48 8 1%
curve; we are supporting
Value-added real estate
development, but we
8 29 51 10 1 %
don’t call it development,
Core real estate
we call it build-to-core.
7 31 54 8 0%
Operating businesses
6 23 62 8 1%
New investment
5 30 53 10 1 %
Development finance
4 25 53 17 1%
Refinancing
3 19 67 10 0 %
Increase significantly Increase somewhat Stay the same

Decrease somewhat Decrease significantly

“We’ve had a development finance “We are very cautious on retail, and
mandate for a while, which is continuing we would only lend to clients who are
to grow for anything with a bed,” one already active in the sector and only
fund manager says. on high street units,” says one bank, We are very cautious on
speaking on a pan-European basis. “We
retail, and we would only
Investors are almost as confident that are not lending on shopping centres or
senior debt will increase in availability for retail in the regions.” lend to clients who are
core real estate. Lenders are continuing already active in the
to back assets with values which on the “A lot of lending institutions have red-
whole are likely to be supported by the lined retail, and that makes it harder to
sector and only on high
benign interest rate environment that has wade in,” one UK adviser says. street units.
caused yields to compress or remain flat
in core markets. In terms of where debt will come from,
survey respondents expect the long-
The exception is retail. Survey term shift away from banks towards
respondents are not asked specifically debt funds and institutional lenders like
about the sector, but interviewees pension funds and insurers to continue.
report that lenders are far less willing More than 70 percent believe alternative
to lend on shopping centres and retail lending platforms will increase their
parks, particularly in the UK, where the lending in the next 12 months, more
sector is facing precipitous falls in both than three times the 22 percent who
income and capital values. expect banks to lend more.
Figure 2-5 Sources of debt in 2020
Alternative lending platforms

17 54 21 6 1 %
Non-bank institutions
12 49 30 7 1 %
Other non-bank lenders

12 52 29 7 1%
Issuance of commercial mortgage-backed securities

5 30 51 12 1 %
Banks
1 21 42 32 3 %
Increase significantly Increase somewhat Stay the same

Decrease somewhat Decrease significantly

Image: The planned Key West mixed-use development, Brussels, Belgium (Henning Larsen)
Figure 2-6 Cross-border capital into European real estate in 2020
1% 4% 1% 4% 4% 9%
12% 14% 19%
21%
33%
32%
41% 21%
42% 52% 41% 51%
The Americas Europe Middle East and Africa Asia Pacific
Increase significantly Increase somewhat Stay the same Decrease somewhat Decrease significantly
Like investors, banks are reacting When it comes to cross-border capital

to the increased competition with into Europe, 2020 looks very similar to
caution. “We are more focused on 2019: the biggest increase is expected
the risk side now, and for that reason from the Asia Pacific region, with 70
we will not conduct the same amount percent of respondents predicting a
of transactions as in 2018,” one rise. Ever-growing savings in Asian
lender says. countries, combined with a long-term
outlook, are likely to keep the capital
flowing from the east.

Japanese institutional investors are However, some feel this could be Housing opportunities
making their first forays into European something of a bubble. “There is a
real estate, with the country’s very strong capital flow from Korea at As for the sectors into which capital
Government Pension Investment Fund the moment,” another manager says. is flowing, residential once again
(GPIF) handing out a multi-billion-dollar “That can be a bit concerning in some dominates the upper echelons
mandate last year. But capital from situations. On some deals the top four of Emerging Trends Europe’s
GPIF and its peers will be in the form or five bidders are all Korean asset investment rankings, taking six
of indirect investment in funds rather managers. The exchange rate has led of the top 10 slots. Retirement or
than direct assets. “Japan Post Bank to them becoming aggressive bidders, assisted living, affordable housing,
and Japan Post Insurance have also and that situation can’t go on forever.” rented residential and student
given out big indirect mandates,” one accommodation are operationally
fund manager says. “Those are several European institutional capital should more complex than traditional
hundred million commitments, and stay strong, with roughly the same real estate. Co-living and, to a
the original GPIF commitment is in the proportion of survey respondents lesser extent, serviced apartments
billions. So, the money’s there, and it’s forecasting an increase in domestic are nascent when it comes to
clearly beginning to flow.” capital as last year. There is a slight significant interest from investors.
uptick in expectations of an increase But all these sectors are seen
Investment from China is expected to in North American capital coming to as being underpinned by strong
remain moribund due to government Europe in 2020, with the cycle on the demographic demand.
capital controls, but South Korean other side of the Atlantic even further
capital is plentiful, particularly in advanced. The large value-add and
“We are diversifying into alternative
continental Europe. “Korean money has opportunistic fund managers from
sectors – you could call it the beds
gone to Europe because of the currency the US are the vehicles of choice for
and sheds strategy,” one global
play with the euro versus the pound,” investing in Europe. “There is still a lot
investor says, underlining a growing
one fund manager says. of broken real estate in Europe and
trend across Europe. “Even though
money willing to invest if you can take
you have seen significant yield shift
that and turn it back into core product,”
in those sectors, we still think these
one value-add investor says.
are young markets, particularly the
beds sector. We are a core, long-
term investor, so we look at it on a
Figure 2-7 Capital raised by Europe-focused relative basis. The overall population
private equity funds Q4 2018–Q3 2019 trend is what gives us our long-
term view. Beds are a good long-
Fund of funds 0.3
Secondaries 0.1 term strategy.”
Debt 1.6
Core 6.3
Affordable housing rises up the
ranks this year, from 11th place to
Core-plus
ninth for investment prospects and
€bn 1.0
from 12th to fourth for development
Opportunistic Value prospects. Housing affordability
17.6 added 4.8 is clearly a pressing issue for
European real estate professionals:
61 percent are concerned about
Source: Preqin
its impact on business in 2020 and
50 percent expect the problem to
worsen over the next five years. It
has been a sector which traditional
commercial real estate investors
have avoided until recently, but the
prolonged low interest rates make
the relatively low returns here more
palatable. And the overwhelming
need for affordable housing makes it
an opportunity.

“If there is a megatrend in urbanisation, One note of caution about investing in Student housing continues its rise up
and people still flock to big cities, then rented residential: it comes with high Emerging Trends Europe’s investment
there is demand for housing, and for political risk. Many interviewees cite the prospects rankings, and in the UK in
affordable housing. So, we are happy decision by the city government of Berlin particular the yields commanded by
to keep investing in that strategy,” one to impose rent controls as an example prime assets imply that it is moving from
global pension fund says. of how political pressures can affect alternative to mainstream.
the financial returns from the sector.
A UK fund manager has “shifted Barcelona and London are among other There is also evidence of growth in
attention to affordable housing”, tapping cities pushing for stronger regulations. continental markets like Germany, Spain,
“huge interest” from investors in a France and the Netherlands. There
specialist fund. “We have decided that “The resi side is facing quite a lot of are fewer international students to rent
when we’re looking at an expansion of political influence, and quite a lot of that rooms to at high prices than in the UK,
our European footprint, we’ll follow the is irrational,” one adviser says. “But and European students are more likely to
same kind of strategy.” people make a mistake: they think if live at home than their UK counterparts.
something is irrational, that means it But the international appeal of cities
won’t happen. But in politics things that like Berlin, Amsterdam, Madrid and
happen are often irrational. Residential Barcelona is starting to attract more
investment is an area that should be left students and thus real estate investors.
to the super-pros right now.”
“We are seeing interesting growth
Table 2-1 Sector prospects in 2020 opportunities in student housing across
the continent,” one value-add fund
Overall rank Investment Rank Development Rank manager says. “That market is still in its
1 Logistics facilities 4.35 2 4.29 1 infancy, so the opportunity is to build
2 Retirement/assisted living 4.37 1 4.26 2 rather than acquire assets.”
3 Co-living 4.31 3 4.23 3
4 Private rented residential 4.17 7 4.14 5
5 Student housing 4.25 4 4.06 9
6 Affordable housing 4.13 9 4.17 4
7 Healthcare 4.21 5 4.09 7
If there is a megatrend in
8 Data centres* 4.14 8 4.14 6
9 Serviced apartments 4.11 11 4.06 8 urbanisation, and people
10 Flexible/services offices and co-working 4.12 10 4.01 10 still flock to big cities,
11 Industrial/warehouse 4.03 12 3.98 11
12 Self-storage facilities* 4.19 6 3.81 15 then there is demand for
13 Hotels 4.03 13 3.87 12 affordable housing. So,
14 Housebuilding for sale 3.92 15 3.87 13
15 Science parks* 4.00 14 3.76 16 we are happy to keep
16 Social housing 3.84 17 3.87 14 investing in that strategy.
17 Central city offices 3.92 16 3.69 17
18 Leisure 3.71 18 3.41 18
19 Parking 3.56 19 3.39 19
20 Business parks 3.39 20 3.19 21
21 Suburban offices 3.34 21 3.22 20
22 High street shops 3.02 22 2.75 22
23 Retail parks 2.90 23 2.44 24
24 City centre shopping centres 2.87 24 2.44 23
25 Out-of-town shopping centres 2.47 25 2.18 25
Generally good = above 3.5 Fair = 2.5–3.5 Generally poor = under 2.5
Note: Respondents scored sectors’ prospects on a scale of 1=very poor to 5=excellent, and the scores
for each sector are averages; the overall rank is based on the average of the sector’s investment and
development score.
*A significantly lower number of respondents scored this sector

Leading logistics Figure 2-8 Prospects for retail Struggling retail

1%
The other side of the beds and sheds 12% 14% But just as residential and industrial/
investment strategy is industrial/ logistics retain their consistently high
logistics, which continues to ride high Emerging Trends Europe rankings, so
in the rankings for both investment and retail remains rooted to the bottom of
development, driven by the continuing the league in terms of both investment
46% 26%
increase in online retail sales. There is and development prospects.
still seen to be lots of room for growth
in European e-commerce, where online It is clear that UK retail is seen as
sales penetration is lower than in the Current valuations for retail assets do not particularly difficult to invest in
properly price in current and future risks.
UK, but catching up. currently, not least because of a raft of
tenant insolvencies and rent reductions
“We may not be in the first innings, 1% secured through the company voluntary
14% 13%
but the fundamentals underpinning arrangement (CVA), a legal process
the sector over the long term are that allows retailers to relinquish lease
compelling,” one big supporter says. liabilities. CVAs make it very hard to
“For logistics, fundamental demand predict how resilient the income on
drivers have changed materially. It is no 24% assets will be, and hence their value. “In
48%
longer correlated with GDP; it is driven the UK right now, it is hard to plan the
by changing consumption patterns. value of a shopping centre when you
Despite that, if you look at the spread There will be more forced sales of retail don’t know what the rent will be,” one
of logistics to office yields, it is still assets in the next 12 months. private equity investor says.
quite material, particularly on a capex-
adjusted basis.” 1% 5%
In continental Europe the picture is
17% more mixed. Unlike in the UK, retailers
20%
For last-mile logistics in particular, typically report sales data to landlords,
supply cannot keep up with demand, and this information is used to set the
because in urban locations the sector is rent. Continental European rents are
competing with other high-value uses, regarded therefore as more resilient.
such as residential. 56% Landlords can act either to tweak rents
or bring in new tenants if retailers start
Some investors think that pricing for to struggle, rather than being left with
existing industrial assets is too hot. But There will be more consolidation an empty space or retailers asking for
few are avoiding the sector altogether. among retail owners in response to dramatic rent cuts, as in the UK.
structural changes in the sector.
Instead, they are looking to build:
industrial and logistics offer the best “There is a cold wind blowing through
prospects for development, according Disagree strongly Disagree the retail sector at the moment,” one
to respondents. Neither/nor Agree investor says. “That will have an impact
Agree strongly on the continent, but I don’t believe to
“Yields on UK logistics are pretty the extent we are seeing in the UK.”
keen. I don’t think I’d be a buyer at 4 Source: Emerging Trends Europe survey 2020
percent, that seems pretty keen,” one

private equity investor says. “Germany
is starting to get that way; you are
seeing some deals at 4–5 percent, and
even with the 10-year swap so low that
feels keen, so that pushes you towards
development. As long as the economy
remains strong, then we would buy
projects for development.”

Indeed, 62 percent of respondents “We will look back on retail as if we
anticipate forced sales of retail assets were in 2009/10 when nobody wanted
in the coming year, but on closer to put any money to work in real estate
examination the survey reveals a wide because they were nervous. And Repurposing of
division between UK and continental that ended up being one of the best
assets has become not
respondents: 90 percent and 56 percent investment opportunities just to put
respectively. Across Europe, nearly more capital in.” only viable but a highly
three quarters of respondents believe sought-after option for
there will be further consolidation This feeds into a wider trend: the
among retail owners in response to repurposing of property away from uses
many investors.
structural changes in the sector. now seen as increasingly obsolete and
therefore less profitable, towards real
“You can buy retail at prices I’ve never estate that fits the way people use the
seen before in my entire career,” one built environment today.
opportunity fund manager says. “Will
retail reprice? If you look at the share Almost half the survey respondents
prices, yes, but we have been buying say that they increased the amount of
well wide of even those levels. We have property they repurposed from one use
been buying assets that are trading to another in the last 12 months, and
okay even through the repricing, so we two thirds expect such repurposing
think they will grow over time.” to rise over the next five years. As one
Greek interviewee says: “Repurposing
One investor even compares it to the of assets has become not only viable
buying opportunity in the wake of the but a highly sought-after option for
global financial crisis. many investors.”
Figure 2-9 Change in the number of assets repurposed
3% 8% 3% 1%
16%
39% 29%
50%
51%
Last year In next 5 years

Increased significantly Decreased somewhat Increase significantly Decrease somewhat
Increased somewhat Decreased significantly Increase somewhat Decrease significantly
Stayed the same Stay the same

In fact, the survey reveals that offices “Generally we are repurposing shopping
are more commonly subject to a centres into mixed residential and
change of use than retail. Either way, employment space, making co-working
the end game is very often some form part of mixed-use schemes to drive
of residential or mixed-use strategy, and activity back into town centres,” one
the interviews suggest it is prevalent in pension fund says.
cities across Europe.
Even in retail parks, there is a growing
“The biggest opportunity lies in feeling that big box retail can be
the conversion of office buildings converted to last-mile logistics facilities
into serviced apartments or other to meet growing e-commerce demand.
type of residential properties
with characteristics and offerings But those that own retail or are looking
assimilated to hotels,” one investor to buy it will need to be willing to put
says. It is a strategy supported by in money to adapt assets to the needs
cyclical and secular trends: residential of the modern world. “It will come
prices make converting offices down to location, trading area and
financially viable, while the long-term do you have the ability to create a
growth of cities drives up demand mixed-use environment,” one value-add
for housing. manager says. “Not every town needs a
250,000-square-foot shopping centre in
“In Brussels there are a number of the town centre.”
refurbishments and re-positionings that
have happened and are happening,
and with our investors we are capturing Figure 2-10 Most common asset to repurpose/repurposed into
one or two,” says a pan-European
fund manager. “There have been some
Most common asset to repurpose
very interesting mixed-use schemes
that connect to public transport in that 72% 64% 34% 33% 25% 24%
marketplace. That’s going to be the
growth area, and that’s where we’re
positioning our clients.”
In retail, for shopping centres the move Office Retail Residential Mixed use Leisure Logistics
is towards a greater mix of uses, to
reflect the reduction in goods being
Most common assets repurposed into
bought in store and the desire for
people to live, work and play in close 68% 54% 36% 31% 19% 11%
proximity. That is especially true of town
centre schemes.
Residential Mixed use Office Leisure Logistics Retail

Mixed use is the second most popular
Figure 2-11 Currently investing in Figure 2-12 Intending to invest in
property type when investors are
mixed-use assets mixed-use assets
considering what to do with defunct
assets. Of those who are not currently
investing in mixed use, two thirds
say they are unlikely to go down that 54% 46% 34% 66%
route. But when asked why, the most
common reason cited is a lack of
available assets. In repurposing assets Yes No Yes No
from a single usage into mixed use,
current owners might be tapping into
latent demand, as well as creating Figure 2-13 Managing mixed-use assets
assets that fit more easily into the
way urban citizens want to use the Shared management based on the different uses 41%
built environment. Led by team managing dominant use 31%
The repurposing of obsolete real estate Specialist mixed-use management team 23%
to be fit for the modern world will take Other 4%
many years and many billions of euros,
and it is inherently a process without
end. It would seem that the investors, Figure 2-14 Reasons for not investing in mixed-use assets
developers and lenders active in Europe
are increasingly ready for the challenge Lack of suitable available product 33%
and the opportunity it presents. Does not meet our risk/return requirements 31%
“For us, mixed use is the future of real Does not have the in-house expertise to source and evaluate assets 11%
estate: one day we will not talk about Does not have the in-house expertise to manage assets 3%
an office area, we’ll talk about an area
where people can work, play, enjoy, Other 21%
live,” concludes one global investor. “It’s
why we like to invest in large mixed-use Source: Emerging Trends Europe survey 2020
or regeneration projects or areas that
are developing in cities. In a mixed-use
scheme we would look at retail. But
we wouldn’t go and buy a suburban
shopping centre on its own.”

Chapter 3
Markets to watch
“We are late in the cycle, and it seems to be never-ending.
We have been ever more cautious on location and quality
of assets, particularly on location.”
Director, global investor
Image: Office buildings along John

34 Emerging Trends in Real Estate® Europe 2020 Rogerson’s Quay, Dublin, Ireland (IPUT)
This year, opportunity and And despite the “gilet jaunes”
caution are driving Europe’s protest movement, France’s En
real estate industry. Whether Marche government, elected in
their business is global, 2017, wins points: “They have made Public transport is
pan-European or national,
economic reforms, and it is easier opening up new areas of
to make decisions there, as that will
those canvassed by Emerging have a positive impact,” says a global Paris. These are
Trends Europe are focusing broker. “Of the big three countries, big opportunities.
on cities that offer liquidity France looks the most stable and the
and connectivity while most attractive.”
keeping a wary eye out for
political instability. Infrastructure and politics also loom
large in Berlin. The previous darling
of Emerging Trends Europe, it is still
Paris is the clear favourite for 2020,
very high up on most investors’ wish
ranked Number 1 for overall prospects.
lists but comes second in this year’s
“Paris has three great, extra things
survey. Success is bringing collateral
going for it: the 2024 Olympic Games,
concerns; for some, Berlin “is no longer
Brexit – it is just two hours from
an opportunity as prices are too high
London by high speed train – and the
across all sectors”.
Grand Paris project,” says a pan-
European investor. France’s capital
Infrastructure issues are also cited,
also provides scale, liquidity and
notably that existing air connections are
international cachet. “It is a truly global
“disastrous”; Berlin’s new Brandenburg
city with nicely diversified occupier
international airport, originally planned
market and currency-friendly,” says
to open in 2011, is now pencilled in for
another investor.
October 2020.
But it is Grand Paris that makes the

But many more are worried about
French capital stand out. This ambitious
the social consequences of, and
€26 billion project aims at transforming
political responses to, Berlin’s rapid
it into a 21st-century metropolis and
transformation. The introduction of
includes a fundamental redrawing of the
a cap on rocketing residential rents
public transport network.
has set alarm bells ringing across the
European real estate industry.
“Public transport is opening up
new areas of the city. These are big
opportunities, and we are investigating
those,” says an international investor.
Figure 3-1 Europe's 10 most active markets, Q4 2018–Q3 2019 (bn)
€24 €12 €12 €6 €6 €5 €5 €5 €5 €4

London Paris Berlin Frankfurt Vienna Madrid Munich Hamburg Dublin Amsterdam

Table 3-1 Overall real estate prospects Table 3-2 Local outlook: Change expected in rents and
capital values in 2020
Overall rank Overall prospects Overall rank Rents Capital values
1 Paris 2.16 1 Athens 4.14 4.00
2 Berlin 2.13 2 Lisbon 3.87 3.75
3 Frankfurt 2.07 3 Berlin 3.84 3.70
4 London 2.03 4 Amsterdam 3.78 3.74
5 Madrid 1.89 5 Munich 3.84 3.67
6 Amsterdam 1.85 6 Hamburg 3.80 3.65
7 Munich 1.82 7 Frankfurt 3.73 3.62
8 Hamburg 1.68 8 Lyon 3.66 3.68
9 Barcelona 1.54 9 Luxembourg 3.69 3.64
10 Lisbon 1.52 10 Copenhagen 3.69 3.56
11 Milan 1.36 11 Dublin 3.69 3.57
12 Dublin 1.35 12 Paris 3.65 3.58
Mean
13 Brussels 1.32 13 Helsinki 3.65 3.58
14 Warsaw 1.14 14 Oslo 3.75 3.47
15 Vienna 1.09 15 Madrid 3.63 3.54
16 Luxembourg 1.06 16 Vienna 3.50 3.62
17 Zurich .95 17 Warsaw 3.47 3.57
18 Stockholm .92 18 Prague 3.46
3.54
19 Copenhagen .87 3.46
19 Budapest 3.52
20 Prague .85
20 Milan 3.51 3.45
21 Helsinki .79
21 Stockholm 3.59 3.36
22 Rome .78
22 Barcelona 3.43 3.24
23 Manchester .72
23 Zurich 3.19 3.45
24 Birmingham .64
24 Brussels 3.32 3.30
25 Edinburgh .60
25 Edinburgh 3.28 3.11
26 Lyon .59
26 Rome 3.18 3.09
27 Budapest .56
27 Birmingham 3.24 3.00
28 Athens .55 3.05 3.11
28 Moscow
29 Oslo .37 29 Manchester 3.11 3.00
30 Istanbul .35 30 London 2.65 2.57
31 Moscow .17 31 Istanbul 2.60 2.56
More than 1 standard deviation above mean Increase Stay the same Decrease
+/ – 1 standard deviation of mean
More than 1 standard deviation below mean
Source: Emerging Trends Europe survey 2020 Note: Respondents who are familiar with the city scored the expected
change for 2020 compared to 2019 on a scale of 1=decrease substantially
to 5=increase substantially and the scores for each city are averages;
Note: The method of scoring overall real estate prospects has been modified cities are ranked on the basis of the average of expectations for rents and
this year. See page 40. capital values.

“A sometimes dysfunctional local It is clear there is a large amount of Iberian attractions
government with a leftish, greenish investment firepower which is poised,
bent that is very hostile to investment. waiting for the Brexit dust to settle
Madrid’s overall prospects are also
The political class in Berlin has before moving in. “We are playing
highly rated, more so than Barcelona’s.
created a supply shortage,” says a shadow scouting in London because
This year, the Spanish capital is Number
pan-European investor. we want to invest there. London, side
5 with Barcelona Number 7. “There is
by side with Paris, is the largest, most
a shift towards Madrid because the
Germany’s other cities – Frankfurt, transparent and efficient market in real
city has changed a lot,” says a pan-
Munich and Hamburg – remain among estate,” says an investor whose “dream
European investor.
the top 10 picks at Numbers 3, 7 and is repricing of 10–12 percent in the best
8 respectively. The country’s economy areas of London”.
Spain’s capital is attracting strong
might be “a little bit wobbly”, but the
corporate investment from international
fundamentals of these markets are The same enthusiasm is not evident
companies, and much of its office stock
judged “quite healthy”. Germany’s for the UK’s smaller regional cities.
is “an obsolete product”. Mixed-use
financial engine, Frankfurt, is “a Although their CBD office markets are
development and residential for rent
giant machine with an increasing doing well, Manchester, Birmingham
are tipped as less-exploited sectors
population and significant GDP growth”; and Edinburgh are all clumped, at
offering good opportunities.
its occupier base is broadening Numbers 23, 24 and 25, in the lower half
beyond banking. of the overall prospects league. “We are
Barcelona still figures high on shopping
active in Manchester and Birmingham,
lists, but there is an inhibiting factor.
Munich also benefits from a strong and and we are about to acquire an asset
“Politics affects our view of Barcelona
diversified economy. “It is a healthy in Edinburgh, but they are all under the
where rental growth is very strong, even
market with virtually no vacancy and cloud of Brexit,” says a pan-European
stronger than Madrid. But if political
huge demand, not only from German investor/developer with two decades of
instability returns it will affect the
and local Munich occupiers but also experience in the UK.
market adversely,” says a major Iberian
from international firms,” says a German
player. In particular, the local authority’s
investor. Hamburg, too, is popular and
Amsterdam appeals decisions to regulate residential
consequently extremely competitive
developments heavily has put some
and pricey.
Back on the other side of the Channel, off the city. But for others, “sometimes
Amsterdam is another continental political threats present opportunities”.
London’s prospects are also highly
city that, at Number 6, scores highly
rated. “In spite of Brexit”, Emerging
this year. “Amsterdam and everything One other southern European city
Trends Europe’s respondents rank
around it are hot. I like it but you are is also ranked in the top 10: Lisbon
it Number 4 this year. “London has
paying top dollar already, and so for me (Number 10). Though a relatively small
staying power. London has culture, it
it is on the watch list,” says a European market, Lisbon has many admirers
has arts and education, it has a rule of
investment manager. – indeed, some find it “now too hot”.
law. Even if London’s mispriced, London
Competition for core offices is strong,
will always be the gateway to Europe,”
The city has worked through the and yields have fallen; players there
says a global investment banker.
office oversupply left from the last have started to move up the risk curve.
cycle, and rental growth is coming Plus, there is growing interest in hotels
through. However, the cost of housing and student housing.
is becoming an issue, especially
if Brexit-related moves bring more
London has staying high-income residents to the city, says
a local.
power. Even if it’s
mispriced, London will
always be the gateway
to Europe.

Figure 3-2 Overall real estate prospects
Above Average Below

average average
Helsinki
Oslo
Stockholm Moscow
Copenhagen
Edinburgh
Dublin Warsaw
Manchester Hamburg Berlin
Prague
Amsterdam
Brussels Vienna
Birmingham Frankfurt Munich Budapest
London Luxembourg
Paris Milan Istanbul
Rome
Zurich
Lyon
Athens
Madrid Barcelona
Lisbon
Just below Lisbon at Number 11 is Just above the league average in

Milan. “Milan is playing in the European terms of overall prospects are Dublin
league,” asserts a local adviser. While and Brussels: Numbers 12 and 13
some cite Italy’s political instability and respectively. Dublin’s popularity
low GDP growth as cause for concern, with Emerging Trends Europe’s
the country’s northern powerhouse is constituency remains strong. Its office
largely exempted from these worries. market has benefited from “Brexit
demand”: “scores and scores of small
Milan is living another “In Milan, the economy is strong, and transactions” from businesses in the
golden age, especially because not everybody wants to be UK. Plus, there are new international
in Italy you can find some interesting investors who “are looking to Dublin as
with the vision of a returns.” The city’s leadership wins their London equivalent”.
city that could grant a plaudits for its urban regeneration
high quality of life, with projects; looking ahead, the M4 metro But the city’s boom has eroded housing
will start operating in 2022, followed by affordability. “There’s a social issue
environmental quality, the Winter Olympics in 2026. “Milan is around gentrification of certain parts
services and green areas. living another golden age, especially which is displacing potential workers,
with the vision of a city that could grant and Dublin doesn’t have a transport
a high quality of life, with environmental infrastructure to support the kind of
quality, services and green areas.” mobility that you would have in the
bigger cities.”
By contrast, Rome is much more lowly
rated by Emerging Trends Europe’s
respondents. Unlike Milan, lack of
transparency makes its real estate
market mostly a local affair, and the city
authorities are not as pro-active.

Brussels, long considered a dull and Scandinavian This is particularly noticeable in the
unrewarding market, is now motoring case of Athens, which is now viewed
ahead and starting to see rental growth.
sustainability as a recovery play. With GDP forecast
“Nothing new has been built for 10 to grow by 2.2 percent in 2020 and a
years, and a lot of older buildings have Of the Nordics, Stockholm and more business-friendly administration
ended up as residential and hotels,” Copenhagen, Numbers 18 and 19, in charge, some opportunistic
notes an investment manager. However, are currently favoured over Helsinki, international capital is trickling in.
“the coordination of public transport in Number 21. The former both pop up
Brussels needs to improve”. on international investors’ wish lists The same cannot be said of Istanbul
this year: “In Stockholm the economic and Moscow, which are languishing
Nearby, the small but business- fundamentals are great,” says a German at the bottom of the overall prospects
friendly Luxembourg, Number 16, is investor. “A lot of innovation and good league. And in both cases politics is
on the rise as more foreign investors spaces,” notes a local. Copenhagen the defining factor. The collapse of
are coming into the Brexit-benefiting wins points for its environmental Turkey’s currency, its political travails
Grand Duchy. “It’s got interest both policies and moves to promote bicycling and stuttering economy make it a
from value-add and core-plus. I think over cars. “But again, it is a small city, no-go zone for most international
people see that is still sustainable, with it’s a small transaction volume,” says an investors. “Even the risk-takers won’t
possibly some further upside both on investor/developer. And Helsinki is also venture in because they think it is a
the yield and on the rental basis,” says starting to attract outside interest. falling knife.” In Istanbul, local players
an investment manager. are gloomy, citing oversupply in the
Oslo, however, is ranked further below office and residential sectors. “The best
Along with Luxembourg in the middle of its Nordic neighbours: Number 26. It opportunities are in tourism,” says one.
this year’s prospects league are Vienna, is one of six cities whose overall real
Zurich, the Central European markets of estate prospects respondents are least Sanctions and a weak ruble are
Warsaw and Prague, and the Nordics. enthusiastic about for 2020. But in continuing to hit Moscow. “The biggest
Their positioning, between Numbers the case of the first four – Budapest, issue for Russia is politics,” says a
14 and 20 in the overall ranking, Lyon, Athens and Oslo – it is partly developer. With international investors
reflects the fact that relatively few of their smaller scale and relative lack of out of the picture, liquidity is also an
Emerging Trends Europe’s respondents liquidity that makes them less attractive issue and domestic capital is ruling the
are currently active in these cities. in a pan-European context (see page market. But those who remain active in
However, those who are have an upbeat 40). When judged purely by local Moscow are more upbeat. “The biggest
assessment. “Warsaw and Prague players active in the markets, all four of opportunities are in offices and retail
are on their way to being cities like these cities are thought to offer good segments in Moscow due to a lack of
Frankfurt, Brussels or Vienna,” says investment and development prospects new institutional-quality supply and
a regional specialist. “The economic in 2020. The local outlook for rents and the depressed rental rates, which are
growth is good, as is the relative capital values is also positive. starting to recover,” says a local.
pricing,” adds a global investment
manager.
Vienna is judged an attractive city with

a fast-growing population, but one that
offers limited scope in its office market;
investors have switched to its residential
market, which is booming. Zurich is a
very tight market, dominated by local
players: “For international investors it is
a very closed shop.”

Scoring cities
This year, Emerging Trends Figure 3-3 shows the factors that It is also important to note that if a
Europe has changed the Europe’s real estate industry considers city places low down in the rankings,
way it calculates the overall when selecting a city for investment the position will reflect two things:
real estate prospects for or development. Market size and the number of those respondents
liquidity is a key selection criterion for who actually score it, plus those who
the 31 cities featured. The
42 percent. However, it is not the only could have, and their opinion of its
scoring system used to rank one: transport infrastructure, returns, prospects. For example, compare
the overall prospects – a availability of assets, city leadership Athens with London, two markets of
combination of the outlook for also count. different size and liquidity. For Athens a
investment and development limited number of mostly local players
– has been modified to include This year, the overall real estate are very positive about its investment
an element that reflects the prospects are based on a modified and development prospects. But the
scale/liquidity of the city’s scale of 0 (avoiding) to 5 (excellent), majority of pan-European and global
from a wider range of survey players have not scored it.
market, as represented by the
respondents: both those who are
number of survey respondents familiar with the city and others who On the other hand, many respondents –
who could potentially be potentially could be investing or local, pan-European and global –
active in it. developing there but are not. scored London as having more or
less average prospects, favouring its
This change is introduced to capture In previous years, survey respondents liquidity and size despite the average
the wider pan-European and global were asked to score the cities they short-term outlook for the market.
view of cities’ real estate markets. In the were familiar with on a scale of 1 (very
17 years since Emerging Trends Europe poor) to 5 (excellent), and the overall Thus, although those who are familiar
started surveying Europe’s cities, they prospects of a city was the mean with London are less enthusiastic
have evolved from largely domestic of the investment and development about it than their counterparts are in
markets, dominated by local players, ratings that this smaller group of Athens, the fact that it is a big market
to markets attracting interest from all respondents provided. that attracts many players puts London
corners of the globe. Today, 51 percent much further up the rankings.
of the real estate firms canvassed by Table 3-1 shows this year’s scores and
our survey have a pan-European or ranks the cities according to how much
global focus. they deviate from the average/mean
score. Because the way the scores are
calculated has changed, this year’s
numbers and rankings for a city’s
overall real estate prospects cannot be
compared to previous years’.

Figure 3-3 Importance when selecting a city for investment or development
Transport connectivity In the 17 years since

58 37 4 %
Emerging Trends Europe
Forecasted real estate returns started surveying
45 42 10 3 % Europe’s cities, they have
City’s economic performance evolved from largely
45 49 5 1 % domestic markets,
Availability of assets/opportunities for new development dominated by local
43 47 9 1% players, to markets
Market size and liquidity attracting interest from all
42 50 8 % corners of the globe.
Regulatory environment
38 49 12 1%
Digital connectivity
32 47 20 2 %
Attractiveness to talent
31 49 18 2 %
City leadership
20 53 25 2 %
Housing affordability
17 44 35 4 %
Affordabilty of space for new/small/growing businesses

13 46 37 5 %
Very important Somewhat important

Neither important nor unimportant Not at all important

Chapter 3: Markets to watch
Cities
Paris (1)
Paris is firmly at the top of investors’ list of most desirable

Investment prospects: local outlook, 2010–2020 markets, attracting capital of all kinds from every quarter
of the globe.
Excellent
With yields for prime central offices at or below 3 percent,
Good the core market is seen as extremely expensive by some
respondents. “We have leases going over €900 per square
Fair metre per annum for offices in Paris. It is, to me, slightly
Paris dangerous,” says a French investment manager.
Poor
Yet with many interviewees also highlighting the descent of
Very poor government bond yields further into negative territory, the
Year 10 11 12 13 14 15 16 17 18 19 20
French capital’s large, buoyant and liquid market continues
to attract insurance, pension fund and retail investor money
Source:
Note: TheEmerging Trends
local outlook Europeon
is based survey 2020.
scores given by respondents who are familiar with the city. prepared to invest at record low cap rates. “We are still active
Note: The local outlook is based on scores given by respondents who are familiar with the city.
in Paris despite the pricing there. The city is an economic
Paris powerhouse, and rents still have some upside potential,” says
Transaction volumes, 2010–Q3 2019 a German fund manager.
(€bn)
This means it is also a great time to sell, and the market is
15
busy. An influx of money has come from South Korea: €4.4
billion of capital across seven large transactions in 2019,
12
targeting very large lot sizes in central locations, especially
La Défense, where both vacancy and yields are a little higher.
9
In most cases, this cohort was able to buy at yields of 4.5
percent or slightly above.
6
Yields have compressed to between 3 percent and 3.5

3
percent in central districts outside the prime core, such as
Neuilly-sur-Seine and Boulogne-Billancourt, and the most
0 sought-after investments here and further out are value-
10 11 12 13 14 15 16 17 18 Q3 19
add, refurbishing or developing to core. “While core is too
Note: Figures are provisional as at 30 October 2019. expensive for us, you can find a great deal of opportunities
Paris
from core-plus to opportunistic,” says a pan-European
All-property return, 2009–2017
investment manager.
%
12 The Grand Paris infrastructure project is responsible for many
opportunities. It is adding 200 kilometres of rail and 68 new
8
stations to the public transport network, opening up areas of
4 the city: from Saint-Denis, which is also benefiting from the
2024 Olympics, out to the Périphérique ring road.
0
“More people are looking at student housing and build-to-rent,
-4 sectors which are being pioneered in Paris,” says a pan-
European broker. Another new sector is last-mile logistics.
-8
The city’s first multi-storey logistics warehouse has opened
-12 at Porte de Gennevilliers and is being used by two retailers to
9 10 11 12 13 14 15 16 17 transport goods using electric vehicles to central Paris and
Total return Capital growth Income return western suburbs.
Source: MSCI

Berlin (2)
Has Berlin, the nonpareil of the European real estate market

Investment prospects: local outlook, 2010–2020 for several years, lost any of its allure? “Berlin has been doing
well, but will it be double-digit growth for the next few years?”
Excellent
Most Emerging Trends Europe interviewees remain fans.
Good “Berlin is still the star and the shining light and the city
everybody wants to be in. I tell people, ‘if you look at the last
Fair Berlin transaction that was done in Berlin, and you try to price the
next transaction at that level, you’ll lose.’ You need to think
Poor ahead two years to where the market will be. It still has a lot
of room to run,” argues a financier.
Very poor
Year 10 11 12 13 14 15 16 17 18 19 20 The consensus is that the German capital is still a good

bet in both the short and long run. In the immediate future
Source: Emerging Trends Europe survey 2020. “rocketing” rental growth is expected to continue in an office
market where vacancy stood at a miniscule 1.4 percent in
Berlin
the middle of 2019, and where as much as 900,000 square
Transaction volumes, 2010–Q3 2019 metres of take-up is expected over the course of the year.
(€bn)
Residential rents have also soared, and the municipal
15
government’s introduction of a draft law to cap the amount
tenants pay for five years represents a rare cloud on the
12
horizon. “Listed residential companies with exposure to Berlin
have seen their share prices fall,” says a German investor,
9
who warns that the measure will be counterproductive
“because investors will shy away from the market and will not
6
build, or invest into, new residential buildings”.
3
A number of interviewees believe that ultimately Berlin will
emerge as the hitherto multipolar country’s pre-eminent
0
10 11 12 13 14 15 16 17 18 Q3 19 city. “It is still in the process of making a quantum leap to a
different role within Germany. It is no longer only the political
Note: Figures are provisional as at 30 October 2019. centre of the country, but it is becoming more of an economic
Berlin
player,” says one. “Berlin is developing into the peer of
London and Paris,” adds another.
%
15 Prices have risen rapidly to match or exceed those in other
German cities, so investors may have to become savvier.
10 “It’s the cyclically most advanced market in Europe, probably
not far off where the US is, and so it warrants much more
5
careful examination. That doesn’t mean you can’t make
0 some money along the way. It just means you have got to be
more selective and not just spray your capital around there,”
-5 advises an international investor.
-10
-15
9 10 11 12 13 14 15 16 17
Total return Capital growth Income return
Source: MSCI

Frankfurt (3)
At a time when the German economy is slowing and the

Investment prospects: local outlook, 2010–2020 country’s banking sector continues to struggle, the vigour of
Frankfurt’s property market is a mystery to some. “Frankfurt
Excellent
is doing quite well, but I can’t explain it. It may be benefiting
from Brexit and that the effect of the restructuring of the big
Good German banks hasn’t reached the office market as much as
expected,” muses an interviewee.
Fair Frankfurt
Deutsche Bank, one of the city’s biggest occupiers,
Poor announced a drastic cost-reduction drive and 18,000 job cuts
in mid-2019, but the impact on Germany’s financial centre
Very poor may be less than feared, says a German investor: “While
Year 10 11 12 13 14 15 16 17 18 19 20 there will be some job losses in Frankfurt, it is the overseas
Source: Emerging Trends Europe survey 2020.
investment banking divisions that are more likely to be
Note: The local outlook is based on scores
scores given
given by
by respondents
respondents who
who are
are familiar
familiar with
withthe
thecity.
city. hammered, according to what we hear.”
Frankfurt Meanwhile, the occupier market has remained robust despite

Transaction volumes, 2010–Q3 2019 the macroeconomic headwinds. “Frankfurt is a sound market
with strong demand, and office leasing figures have been
(€bn)
very good this year and last year. The vacancy rate has
10
dropped substantially.”
8
That may be because the occupier base has become more
diverse. “You have a lot of proptech and fintech companies
6
located in Frankfurt, and it has the biggest airport in
Germany. With the European Central Bank there and all the
4 EU regulations, it attracts the audit and law firms. Twenty
years ago, it was mostly banking, and now industry there is
2 much more mixed.”
0 Compared with other German cities, it is relatively

10 11 12 13 14 15 16 17 18 Q3 19
straightforward to develop high-rise buildings in Frankfurt,
Note: Figures are provisional as at 30 October 2019. which has contributed to the market’s reputation for volatility.
Frankfurt
“I worry about rents and overbuilding in cities like Frankfurt,”
All-property return, 2009–2017 says a pan-European debt fund manager. “You can create
a story about Brexit, but it is easy to build in Germany so
% some markets could get overbuilt pretty quickly. If you have a
12 downturn there could be a lot of space that’s not needed.”
8
Permissive zoning also allows the development of new
4 space to meet demand, however, and with Frankfurt’s office
vacancy falling and rents rising, most interviewees think
0 that this is a good point at which to invest. “The market is
intrinsically more volatile than other German markets and that
-4
can play in either direction, but at the moment it is playing
-8 in favour of the landlord. If you play the cycle right you can
make a lot of money, but you always have to be careful,”
-12 concludes a local.
9 10 11 12 13 14 15 16 17
Source: MSCI

London (4)
Will London in 2020 be off-limits, a buying opportunity, or a

Investment prospects: local outlook, 2010–2020 case of wait-and-see? Those canvassed by Emerging Trends
Europe in mid-2019 agree that Brexit uncertainty is impacting
Excellent the UK capital, but not on how the dynamics of the market
will play out, or on the best strategic approach to take.
Good
Some are steering clear. “London is a no-go area for us at
Fair London the moment,” says a German core buyer. Another institutional
investor says: “Over 10 years London still makes it into our
Poor top 10, but if you take a shorter-term view when you are more
dependent on the market to help you out, then London is not
Very poor even in the top 20. It would be quite gutsy to invest in London
Year 10 11 12 13 14 15 16 17 18 19 20 over the coming year.”
based on
Note: The local outlook is based on scores
scores given
given by
byrespondents
respondents who
whoare
arefamiliar
familiarwith
withthe
thecity.
city. Gauging and pricing the risks associated with Brexit remains
troublesome: “At the moment, the problem is a risk officer
London can’t write down on page one of the dossier what will
Transaction volumes, 2010–Q3 2019 happen,” says a pan-European investor.
(€bn)
For some that means keeping their powder dry for at least
35
a little while longer. “While we have not been willing to buy
30 at the prices being asked, there have been a lot of foreign
buyers who have bid at higher levels – Korean, Middle
25
Eastern – every year there has been a different sort of capital.
20 We are seeing less interest from those foreign buyers, so we
hope to strike a good deal. I do think in the next 12 months
15
we will invest in London again,” says an international investor.
10
5 There are those, though, for whom the iron is already hot
enough. “If you look at the yield and rent levels in London
0 versus most major European cities, it looks much better
10 11 12 13 14 15 16 17 18 Q3 19
value. It is potentially a good buy opportunity when the Brexit
Note: Figures are provisional as at 30 October 2019. mist eventually clears. There will be a buying frenzy then, so
we are attempting to do a few things in advance of that,” says
London
All-property return, 2009–2017 one. A UK-based fund manager is even more bullish: “London
offices represent pretty good value, and we are looking to
% take more risk there at the moment. We feel that is where the
24 smart money should be.”
16
Meanwhile some investors feel more confident playing the
8 long game in the city’s undersupplied affordable housing
sector. “Regardless of Brexit, there is still a housing shortage
0 in the UK. And if there is a megatrend in urbanisation,
and people still flock to London, then there is demand for
-8
housing, and for affordable housing, so we are happy to keep
-16 investing in that strategy.”
-24
9 10 11 12 13 14 15 16 17
Source: MSCI

Madrid (5)
“Everyone is down here; everyone wants to play the growth

Investment prospects: local outlook, 2010–2020 story,” says a global investor about Spain and its capital.
Excellent Madrid’s standout attraction is that it is the largest of a handful

of cities still experiencing “the catch-up effect” from the
Good financial crisis. A REIT CEO adds: “Real estate is not back
to the levels of the last peak; Spain offers the opportunity of
Fair several years of rental growth to come.”
Madrid
Poor The country has healthy GDP growth, forecast at 1.8 percent
in 2019, and corporate investment is rapidly creating new
Very poor jobs. The only potential risk interviewees see is a protectionist
Year 10 11 12 13 14 15 16 17 18 19 20 trade war between the US and China driving Spain into lower
exports and lower growth.
Note: The local outlook is based on scores given by
by respondents
respondents who
who are
are familiar
familiar with
with the
thecity.
city.
The recovery underpins all types of real estate: “Madrid is

Madrid an example of a city where we would like to invest across
Transaction volumes, 2010–Q3 2019 sectors,” says another pan-European investor. This includes
“living”: from student housing to nursing homes. There has
(€bn) been a notable pick-up in nursing home activity, with several
7
pan-European specialists entering Spain this year.
6
Congress’s new Rental Act, approved in April 2019 just before
5
the general election, gave clarity on a residential rent cap and
4 confidence to developers and investors planning to create
3
purpose-built rental product. Rental increases on apartments
are now limited to the inflation rate for five years for individual
2 landlords and seven years for institutional ones.
1
Spain lags behind the rest of the OECD countries in
0 development of its logistics sector; therefore, creating modern
10 11 12 13 14 15 16 17 18 Q3 19
space along Madrid’s main logistics corridors or unearthing
Note: Figures are provisional as at 30 October 2019. sites for urban last-mile delivery is a clear opportunity.
There is even rental inflation in prime retail. “I know that

Madrid
is mind-boggling for some,” says a local CEO, adding
that relatively low densities, no reliance on department
% store anchors and higher consumption “are a win for
18 shopping centres”.
12 CBD office vacancy fell below 5 percent in 2019. With tight

6 supply and rents only half as much outside the M-30 ring,
occupiers have been showing interest in decentralised
0 submarkets – as long as the buildings are good quality and
within reasonable distance of public transport. Local property
-6 companies are in demand to partner with international capital
to refurbish and re-let offices in these locations.
-12
-18 Meanwhile the newly-elected Madrid city council unanimously

9 10 11 12 13 14 15 16 17 approved Nuevo Norte in July. Many hope that this long-
Total return Capital growth Income return mooted proposal to extend the central office area north by
Source: MSCI developing land around Chamartín station will help propel
Spain’s capital into the ranks of top global cities.

Amsterdam (6)
Amsterdam is attracting interest from a wide array of

Investment prospects: local outlook, 2010–2020 investors targeting all its main sectors: office, logistics, hotels
and tourism, and residential.
Excellent
A balanced mix of tourists and business visitors generates
Amsterdam
Good very strong demand for hotels, while the city’s geographic
location in Europe and the freight generated at its
Fair international airport and passing through nearby Rotterdam
port underpins huge interest in logistics properties.
Poor
The Dutch capital appeals to businesses from start-ups to
Very poor international corporations and is one of Europe’s thriving
Year 10 11 12 13 14 15 16 17 18 19 20 tech hubs. Companies looking for space, especially firms
Note: TheEmerging
Source: local outlook is based
Trends Europeonsurvey
scores given by respondents who are familiar with the city.
2020.
with large requirements, increasingly have to leave the centre
Note: The local outlook is based on scores given by respondents who are familiar with the city. – where vacancy is at a record low of 2.2 percent – and the
popular South-Axis district. Developing urban submarkets
Amsterdam with good transport links like Sloterdijk are benefiting. South
Transaction volumes, 2010–Q3 2019 Korean investors have bought here, and older buildings are
being renovated alongside new developments.
(€bn)
8
Debt is cheap and plentiful for both standing assets
7 and development. “We have increased our business in
6 Amsterdam in the past 12 months. The market is doing well,
5
with higher returns, and there are increasing transactions and
development,” says a lender.
4
3 But this year, some who invest in Dutch commercial property
2 say they are bypassing the capital: “Amsterdam has become
too competitive and crowded.”
1
0 In the residential market, an escalating housing shortage
10 11 12 13 14 15 16 17 18 Q3 19
is pushing up rents and prices. The city has responded by
Note: Figures are provisional as at 30 October 2019. introducing controls on affordable housing. “That is making
it more difficult to build substantial amounts of new housing
and only increasing the price pressure,” says an experienced
Amsterdam
Dutch residential fund manager.
% Residential developers also face stronger sustainability

18 demands, which also pushes up costs plus what a large
Dutch investor says is a 25 percent rise in construction costs.
12 “It really is an issue,” says the fund manager. “It all combines
6 to create a decline in productivity.”
-6
-12
-18
9 10 11 12 13 14 15 16 17
Source: MSCI

Munich (7)
For some capital allocators, particularly those keen to eschew

Investment prospects: local outlook, 2010–2020 risk, Munich’s lasting qualities exert an even greater pull than
the rapid growth evident in some rival German cities. “It is a
Excellent very attractive, stable place, less volatile than Frankfurt and
also healthier in terms of its long-term track record of stability
Good compared to Berlin, which has never seen a boom like the one
it is currently experiencing,” says an interviewee.
Munich
Fair
The Bavarian capital scores consistently highly on measures
Poor of quality of life and is ranked third among global cities in
the Mercer survey’s estimation. That makes it an easy sell to
Very poor occupiers keen to recruit and retain staff, argues a regional
Year 10 11 12 13 14 15 16 17 18 19 20 investor: “Munich is an extremely nice place to live and work.
If you want to attract new people to your company in Germany
Note: The local outlook is based
based on
on scores
scores given
given by
by respondents
respondents who
who are
arefamiliar
familiarwith
withthe
thecity.
city. the best option is Berlin and the second best is Munich in
terms of lifestyle. Tenants like Google put their offices there
Munich
because they can attract young talent.”
Transaction volumes, 2010–Q3 2019
(€bn) Office vacancy is less than 3 percent and continued occupier

6 demand is exerting sustained upward pressure on rents.
“We bought a building in Munich two years ago with rents in
5 place of €144 per square metre per annum, and we recently
signed a deal at €216, a 50 percent uplift in two years,” boasts
4
an interviewee.
3
Another offers a caveat, however: “The problem is, there’s not
2 a lot of opportunities there. Not a lot of transaction activity.”
The assertion is borne out by commercial property transaction
1 volumes for the first half of 2019 that fell by 46 percent year on
year to €1.9 billion. The city is therefore a seller’s market: “We
0
10 11 12 13 14 15 16 17 18 Q3 19 are looking at Munich a lot, but the pricing makes it very tough
Source: Real Capital Analytics to get into that market,” says a German investor. “Munich is
Note: Figures are provisional as at 30 October 2019.
impossible,” adds another interviewee.
Munich The dynamics at play may create opportunities in neighbouring

All-property return, 2009–2017 markets, argues a local: “Munich is already too expensive,
and thus smaller nearby cities such as Augsburg will profit.”
% The city’s transport infrastructure is under increasing strain,
18
with potentially negative consequences for the long term,
suggests another: “In Munich we have a mobility crisis. There
12
is chaos in the morning and chaos in the evening. Cities that
6 are unable to create more mobility could lose a substantial part
of their attractiveness.”
0
Meanwhile, the city is expected to attract another 150,000
-6
residents by 2035, and with housing development failing to
-12 keep pace with demand, rents and prices have risen sharply.
Some interviewees fear that Munich and other German
-18 cities facing similar pressures could respond by introducing
9 10 11 12 13 14 15 16 17
tighter regulation. “The concern is that cities like Frankfurt,
Munich, Dusseldorf will look at Berlin and consider their own
Source: MSCI rent freeze.”

Hamburg (8)
A German investor extols the merits of the Hanseatic city:

Investment prospects: local outlook, 2010–2020 “Anybody who is headquartered in Hamburg will sing its
praises. It is a healthy, wealthy city. You have the harbour, the
Excellent strong, diversified economy and aircraft manufacturer Airbus,
and it has a regional airport with better air connections than
Good Berlin, where they are disastrous.”
Hamburg
Fair From an investor perspective there is the usual snag,
however: “It is extremely sought-after and expensive.” Few
Poor assets come to the market – in the first half of 2019 around
€1.6 billion of commercial real estate was traded, around half
Very poor the figure for the same period in 2018 – and when they do,
Year 10 11 12 13 14 15 16 17 18 19 20 they are extremely expensive. Prime office yields stand at
3 percent, and in a continued low interest rate environment
outlook is
based on
on scores
scores given
given by
byrespondents
respondentswho
whoare
arefamiliar
familiarwith
withthe
thecity.
city. they are expected to compress further.
Hamburg
Of all the German markets it is the most difficult to access,
says a fund manager: “We try to invest in Hamburg, but
(€bn) we find it hard to compete against the locals who do a lot
6 of business among themselves. Hamburg is the Zurich of
Germany.” “The prices in Germany are crazy and it doesn’t
5 make any sense for us to be in competition with 30 other
bidders,” is a typical complaint.
4
3 Office vacancy is extremely low, standing at 3.1 percent

overall and less than 2 percent in the city core at the 2019
2 half-year mark. “That has led to a very strong dynamic of
rental uplifts in ‘A’ and ‘B’ locations.
1
“Occupiers are looking for good buildings in well-located
0
10 11 12 13 14 15 16 17 18 Q3 19 ‘B’ locations, and they are prepared to pay high prices. That
Source: Real Capital Analytics rental uplift is something that we try to benefit from because
there is a very limited development pipeline in these areas. If
you can buy an asset in a good fringe location you will have a
Hamburg lot of pleasant surprises.”
The local authorities have been actively pursuing an
% integrated strategy to boost and renovate the city; the
12 latest project to take off is URW’s Westfield Hamburg-
8 Überseequartier, a new mixed-used urban district, Europe’s
largest city centre development.
4
-4
-8
-12
9 10 11 12 13 14 15 16 17
Source: MSCI

Barcelona (9)
Barcelona’s real estate market has shrugged off the political

Investment prospects: local outlook, 2010–2020 upheaval that followed Catalonia’s independence referendum,
which was declared illegal by the Spanish government two
Excellent years ago.
Good “If the political instability comes back, it is going to have an

effect on the market as it had on 1 October 2017 and the
Fair following months,” says the CEO of one Spanish REIT. “Now
rental growth is very strong, even stronger than in Madrid.”
Barcelona
Poor
A partner of a Spanish real estate private equity firm agrees
Very poor and says headquarter relocations turned out to be “a legal
Year 10 11 12 13 14 15 16 17 18 19 20 event rather than an actual movement away of businesses and
Source: Emerging
Note: The Trends
local outlook is Europe survey
based on 2020.
workers”, while the city’s investments are again “as liquid or
Note: The local outlook is based on scores given by respondents who are familiar with the city. even more liquid than Madrid’s”.
Barcelona
Office leasing was the strongest-ever in the first half of 2019;
at 250,000 square metres it was almost a typical year’s figures.
The lack of available space in the CBD and city centre has
(€bn)
2.5
boosted periphery submarkets such as Sant Cugat del Vallès
as well as the 22@ district close to the city centre, driving up
2.0 average rents by 11 percent.
“The same rental tension applies across stock which is

1.5
one-third the size of Madrid,” points out the CEO. Occupational
1.0
demand has squeezed vacancy levels in the centre to 2
percent and below 5 percent in 22@.
0.5
With its cosmopolitan, community feel, Barcelona is a big
centre for co-working. The city is on the buy list for many
0.0
10 11 12 13 14 15 16 17 18 Q3 19 respondents who are hunting for offices they can refurbish
Source: Real Capital Analytics and re-let. “It is always easier to get deals done in Munich or
London than Barcelona because of the scale, but you have to
adjust to that,” says one private equity player.
Barcelona
All-property return, 2009–2017 While the city authority’s hands-on approach to residential
development, with minimum social housing quotas, is disliked
%
15 by some, Barcelona Town Hall is recognised for being
proactive and efficient. The city is focusing its urban expansion
10 agenda on three areas: the next phase at 22@; the ‘Hill and
Harbour’ by the marina south of 22@; and the area north of the
5
main centre around La Sagrera station.
0
A group of Catalonian public bodies are working together to
-5 acquire five large plots of land around the region’s capital to
develop logistics and boost the tight supply.
-10
-15
Meanwhile, as in Madrid, hotels are a strong draw for investors;
9 10 11 12 13 14 15 16 17 both daily rates and growth in revenue per available room have
Total return Capital growth Income return risen in 2019. ASG and Hard Rock International are to invest
Source: MSCI
€200 million developing a 504-bed Hard Rock hotel on the
city’s downtown Fòrum beach.

Lisbon (10)
Another year on in the real estate cycle, and the main change
Investment prospects: local outlook, 2010–2020 in the thriving Lisbon market is that assets have become
more expensive.
Excellent
“Equity continues to be available from a wide variety of sources,
both domestic and cross-border, and it is targeting the spectrum
Good
of investing strategies,” observes a local broker.
Fair
As well as offices, “there are plenty of asset classes to invest in,
Poor Lisbon
including hotels and residential”, says an investment manager
which is expanding into Iberia. “We do like investments such
Very poor as hotels in southern Iberia, Porto and Lisbon that benefit
from tourism.”
Year 10 11 12 13 14 15 16 17 18 19 20
Note: The
Note: The local outlook is based on scores given by respondents
respondents who are
are familiar
familiar with
with the
the city.
city. Even retail attracts interest in this outward-facing corner of
Europe. “In Portugal, retail is still going strong,” the broker says.
Lisbon “This year alone we have registered 400 new leases of units, a
Transaction volumes, 2010–Q3 2019 lot of it food and beverage which is also related to tourism, but
fashion and other uses too. Rental growth is still there for very
(€bn) prime locations and prime shopping centres, but secondary is
1.2 clearly more difficult.”
0.9
Portugal is also riding relatively high in Europe in terms of its
economy, with GDP forecast at 1.6 percent for 2020 while
unemployment continues to fall from its 18 percent 2012 peak to
0.6 under 7 percent, which is also boosting spending.
For investors in core offices, the challenge is finding stock.

0.3
Insurance companies and German funds are especially
competitive and have pushed yields down from 4.5 percent to 4
0.0 percent. Some wonder if the city’s progress towards nearly full
10 11 12 13 14 15 16 17 18 Q3 19
employment will make hiring more difficult at some point for the
Note: Figures are provisional as at 30 October 2019. many companies that have set up service and call centres and
want to expand, or for future FDI.
Lisbon
All-property return, 2009–2017 But even with 10 percent rental growth for class A space in the
last 12 months, from €240 per square metre per annum to €264
% and with €288 in sight, occupier costs are still cheap compared
12
with other cities, and the workforce is young, international and
8 well-educated. These attractions underpin the conviction of the
Spanish REITs and core-plus/value-add funds that are buying
4 repurposing and build-to-core opportunities.
0
There are no large sites available in the city after the sale of the
-4 fair ground site at Entrecampos to a Chinese-backed insurer.
And the Expo Parque das Nações district is almost fully built, “so
-8 we are starting to see development on the fringe of Expo, spilling
over”, says a local agent.
-12
9 10 11 12 13 14 15 16 17
Government approval of ‘SIGIs’, Portugal’s REITs, and
confirmation of funding to expand the city’s airport and construct
Source: MSCI
a second are further pluses.

Milan (11)
Italy’s long-running political instability is raised by many

Investment prospects: local outlook, 2010–2020 rueful Italian interviewees. But respondents also stress that
Milan rises above the national travails.
Excellent
The “locomotive” of Italy is led by strong local government
Good and continues to attract talent and capital from both
domestic and international investors. “Milan has a different
Fair market to other cities in Italy; it plays in the European league,”
says one local CEO.
Milan
Poor
“The Milan Municipal Administration officials are open to
Very poor dialogue and are well prepared,” adds another. “It is the only
Year 10 11 12 13 14 15 16 17 18 19 20 Italian city with a structured, long-term growth plan,” chimes
a pan-European investment manager.
Note: The
Note: The local
local outlook is based on scores given by respondents
respondents who are
are familiar
familiar with
with the
the city.
city.
The city authority is praised for its approach to urban

Milan regeneration with an emphasis on investing in public
Transaction volumes, 2010–Q3 2019 transport, bold architectural design and the value of place-
making – mixing offices, services, and public spaces.
(€bn)
5
In 2023, metro Line 4 is due to start operating and is tipped
to benefit fringe city spots such as the fast-growing Tortona
4
district in the fashionable south-west where investors have
been snapping up offices in anticipation of value increases.
3
In the north arc of the city centre, the Porta Nuova

2
development’s success is driving investment in surrounding
areas including the Scali Milano former rail yards. On the
1
north-eastern fringe, the Bicocca business and university
quarter is attracting international capital for residential and
0
10 11 12 13 14 15 16 17 18 Q3 19 student housing development as well as one of the first
transactions in the city by South Korean investors.
“There are good opportunities if you are able to get an office
Milan building refurbished to grade A specification. You will lease
All-property return, 2009–2017 it in no time at very good rents,” reports one of many pan-
European investors with projects in the city. Demand from a
% diverse tenant base for modern space underpins top rents of
6
€600 per square metre per annum, which is higher than many
4 European cities outside Italy.
2 The city is looking forward to hosting the winter Olympic

Games in 2026. “Thanks to this, there will be need of many
0
more apartments which could be sold at the end of the
-2
international events. This will be a great opportunity for
Milan,” says a local hotel and residential developer.
-4
And as the wealthiest regional economy, close to Europe’s
-6 key distribution routes, Greater Milan is the most active
9 10 11 12 13 14 15 16 17
logistics submarket, offering prime yields of 5.3 percent –
higher than many western European locations.
Source: MSCI

Dublin (12)
“Dublin is positioned very strongly, for political stability, a

Investment prospects: local outlook, 2010–2020 pro-business environment and being able to attract young
people from all over Europe; the quality of immigration into
Ireland is off the charts,” says one local developer-investor.
Excellent
Good Record take-up in the capital’s office sector, led by the

tech giants, is set to continue with an all-time high of live
Dublin
Fair requirements. Consequently, says another local player,
“investors are coming to Dublin who normally would not
Poor because their natural home would have been London.” “There
are German, French and Asian funds coming here,” says a
Very poor third; “Ireland is seen as core for the first time ever,” chimes
Year 10 11 12 13 14 15 16 17 18 19 20 a fourth.
Note: The local outlook is
is based
based on
on scores
scores given
given by
byrespondents
respondentswho
whoare
arefamiliar
familiarwith
withthe
thecity.
city. Real Capital Analytics says Dublin is now ranked as one of
the top 25 most liquid cities for real estate – in the world. Its
Dublin small and more volatile market compensates investors with a
Transaction volumes, 2010–Q3 2019 stable 4 percent prime office yield, which is higher than many
others in the top 25.
(€bn)
8
Some who find the CBD competition too hot tip suburban
7 office markets as the place to invest in 2020. “Rents lag the
6 CBD and traditionally maintain circa 50 percent relativity;
5
if you can buy space in the suburbs there is at least 10-
20 percent potential before it is fully valued,” a local
4
operator believes.
3
2 However, this year interviewees repeatedly raise two
concerns about Ireland and its capital city: Brexit
1
and housing.
0
10 11 12 13 14 15 16 17 18 Q3 19
They acknowledge that Brexit has been a strong driver of
Note: Figures are provisional as at 30 October 2019. demand, both from office occupiers looking to “put a toehold
in the EU so that it covers their bets” to Brexit-boosted
Dublin industrial/logistics take-up of 170,000 square metres in H1
All-property return, 2009–2017 2019, 60 percent up on the same period in 2018. But they
appear more fearful than before of the damaging effects of
% a hard Brexit, which could, because of Ireland’s strong links
40
with the UK, have a severe impact on the country’s economy.
30
There is enormous cross-border investor interest in
20
multifamily housing (43 percent of all investment in H1
10 2019) due to scarcity exacerbated by the capital’s dramatic
business expansion. “The lack of residential property is
0
probably going to become the biggest constraint on the
-10 growth of Dublin. The resolutions of the problems are just
-20 way too slow,” warns the European head of a global firm.
-30 “We have rental levels up to the point that we are having the
9 10 11 12 13 14 15 16 17
same type of debate now that you are getting in Germany,
Holland and elsewhere,” adds a local player.
Source: MSCI

Brussels (13)
“I’ve always believed in Brussels, yet it was hard to sell this

Investment prospects: local outlook, 2010–2020 internally. Today, it is easier to defend our European capital
when it comes to making real estate investments,” says the
local head of a global investor, typifying the positive feedback
Excellent
that the city has received from many this year.
Good Brussels
“There is hunger to be active in Brussels; the residential
Fair market is in good health and roaring ahead. Hotels are as
good as they have ever been,” concurs another investor.
Poor
The growing strength of an office market which saw all-
Very poor time high take-up for a first half-year of 347,000 square
Year
metres in 2019, has piqued investor interest: “Most people
10 11 12 13 14 15 16 17 18 19 20
don’t make any money in Brussels because the market has
Source: Emerging
Note: The Trends
local outlook Europeon
is based survey 2020.
Note: The local outlook is based on scores given by respondents who are familiar with the city. been dead for a long time, but actually it is now showing
good characteristics for well-located CBD offices where
Brussels you are going to benefit from the growth that is coming
Transaction volumes, 2010–Q3 2019 through. Nothing has been built, and redundant buildings
have been converted to hotels and residential,” says a pan-
(€bn)
European investor.
3.0
2.5 “In the office market, rents have increased almost too
much,” quips a Brussels-headquartered interviewee. “We
2.0 were looking for offices for ourselves recently, and where
we would have rented two years ago at €195 to €215 per
1.5 square metre per annum, today it is €270 and landlords will
1.0 hardly negotiate.”
0.5 Another compares Brussels to the city that has been the
darling of the European property market in recent years:
0.0 “Brussels has the capacity to become Berlin. The rents are
10 11 12 13 14 15 16 17 18 Q3 19
relatively stable, and the growth is enormous. Brussels is, by
Note: Figures are provisional as at 30 October 2019. error, always put back.”
Brussels This local player argues that the advantages of Brussels,

All-property return, 2009–2017 which include good train links to Amsterdam and Paris and
a large population, are starting to become clear to investors
% and adds: “The University of Leuven is one of the most
9 innovative ones of the EU. There will be many start-ups and
patents that will have an impact.”
6
3 The city’s notoriously poor commute is still an issue for

some, however: “The coordination of the public transport in
0 Brussels needs to improve. It can take longer to get to work
by public transport than it does by car, even when you know
-3
there will be a traffic jam.”
-6
Municipal authorities are encouraging a shift away from the
-9 private car, which may create opportunities, tips another:
9 10 11 12 13 14 15 16 17
“What to watch in Brussels is connections to public transport.
That’s going to be the growth area, and that’s where we’re
Source: MSCI positioning our clients.”

Warsaw (14)
“We would definitely venture into Warsaw in a more

Investment prospects: local outlook, 2010–2020 significant way,” says a pan-European investor. “The returns
are higher, and you get first-class office buildings and good
logistics facilities in a market that’s growing strongly. It’s
Excellent
that simple.”
Good
The growth story in the Polish capital is compelling,
Fair
Warsaw even for some who previously doubted its sustainability:
“Our business in Poland has been going extremely well.
Poor The take-up in the office sector has been tremendous,
notwithstanding the political gyrations. There was some
Very poor concern in Warsaw that there might be an office oversupply
Year 10 11 12 13 14 15 16 17 18 19 20
because there was quite a large pipeline being developed,
but so far we have seen heavy supply being met by heavy
by respondents
respondents who
who are
are familiar
familiar with
with the
thecity.
city. demand,” says an interviewee.
Warsaw A local highlights the country’s “very good and stable

Transaction volumes, 2010–Q3 2019 economic background; profitability is still at a satisfactory
level, which attracts new capital investors. Therefore, there
(€bn)
should still be a lot of money on the market”.
3
Much investment has been focused on the office sector, but

a German fund manager suggests that other asset classes
2 will take more of the limelight in future: “Poland, given its
relatively young population, its retail consumption, and the
catch-up that is still visible, has some way to go particularly
1 in hospitality, retail and residential – not so much for offices
because occupiers are starting to move their back-office
functions even further east.”
0
10 11 12 13 14 15 16 17 18 Q3 19
Some single out student housing as offering great
potential: “You have to look at the short supply in student
Note: Figures are provisional as at 30 October 2019. accommodation relative to the demand – in particular the
international student demand in the Polish market, which
Warsaw is phenomenal, with the UK unfortunately losing their share
All-property return, 2009–2017 of that market because of their own inward-looking views,”
says one.
%
12 Fewer interviewees raise the risk of political instability this
year, but governance is still an issue in some respects: “Tax
8
and financial unpredictability are a big problem in Poland.
4 Regulations change overnight. This contributes to a negative
opinion about this country,” observes a local.
0
-4
-8
-12
9 10 11 12 13 14 15 16 17
Source: MSCI

Vienna (15)
An investment manager sums up the conundrum of the

Investment prospects: local outlook, 2010–2020 Austrian capital: “Some people say Vienna is boring. The
vacancy rate is always low, and the rent level is stable.
Values are stable and don’t increase quickly. However, it is a
Excellent
very attractive city, and people like to live there. It is a well-
Good developed western European market, and the population is
growing very fast.”
Fair
Vienna With limited development opportunities leading to stasis in
Poor the city’s central business district, Vienna offers less growth
potential than neighbouring CEE office markets, argues a
Very poor regional investor: “Tenants move from place to place, there
Year 10 11 12 13 14 15 16 17 18 19 20 is no significant increase in rent levels, and cap rates are low
because it is looked on as a safe haven. I can’t name a single
Note: The
Note: The local
local outlook
outlook is
is based
based on
onscores
scoresgiven
givenby
byrespondents
respondentswho
whoare
arefamiliar
familiarwith
withthe
thecity.
city. reason why Vienna should outperform over the next years.”
Vienna
On the other hand, people do want to live in Vienna. In 2019
the city celebrated a ten-year reign at the top of Mercer’s
quality of living ranking, and a second as the top-rated
(€bn)
5 settlement in the Economist Intelligence Unit’s global
liveability survey.
4
It has seen a residential development boom, with 12,000 units
3
expected to be completed in 2019 and a further 18,400 in
2020. “Originally, we were just focused on office buildings in
Vienna, but there was so much investor interest in residential
2
that we started buying,” says an interviewee.
1
Most of the forward-funding opportunities in the sector are
already spoken for, however: “Investing for our new fund will
0
10 11 12 13 14 15 16 17 18 Q3 19 be tough because there are not so many developments on
the market. To find assets in good locations is a challenge.”
Meanwhile yield compression may have reached its limit:
Vienna “Unfortunately return expectations have gone down. In
All-property return, 2009–2017 Vienna at the moment you are paying 3.5 to 3.75 percent
yields for residential assets. Three years ago, we got the
% same quality for 4 to 4.2 percent. I don’t think it can get more
9
expensive because for institutional investors 3.5 percent is
6 their limit.”
3 Investors may switch to alternative sectors like student

accommodation in which yields are still comparatively
0
attractive. A global investor cites Vienna as one of
-3 the European cities with “strong universities and high
quality of life, but low provision of purpose-built student
-6 housing stock”.
-9
9 10 11 12 13 14 15 16 17
Source: MSCI

Luxembourg (16)
The likely benefits of Brexit have previously loomed large in

Investment prospects: local outlook, 2010–2020 respondents’ view of the Grand Duchy’s office market, but
now they have their eye on home-grown drivers of prosperity.
Excellent
“In Luxembourg so long as the politicians stay the smartest
politicians on earth things will go fine,” comments a regional
Good
investor. “They are very pro-business but also prudent. It is a
Luxembourg great environment for business as well as socially, a perfect
Fair
mix. They keep on attracting businesses that prove to be
Poor very fruitful. Many people are coming in who would like to live
there if they can afford it.”
Very poor
GDP growth of 2.8 percent is forecast for 2020, ahead of the
Year 10 11 12 13 14 15 16 17 18 19 20
eurozone average of 1.4 percent. Meanwhile, the government
Note: The
Note: The local
local outlook
outlook is
is based
based on
on scores
scores given
given by
by respondents
respondents who
who are
are familiar
familiar with
with the
the city.
city. is forecasting a 25 to 33 percent rise in the Grand Duchy’s
population by 2030. Much of that increase will be driven by
Luxembourg
immigration; workers relocating from other parts of Europe
already represent 48 percent of the population.
(€bn)
Consequently, there will be opportunities in the housing
1.6
sector, argues a local: “There is a very high demand for
residential, and the supply does not meet the demand.”
1.2
Rapid expansion will put pressure on transport infrastructure,
but the Luxembourg government is responding. From 1
0.8
March 2020, all public transport in the Grand Dutchy will be
free. “Issues related to access to the city due to the growing
0.4 numbers of commuters from neighbouring countries is
critical. The completion of the tramway in Luxembourg city in
2020 should be a game changer for real estate.”
0.0
10 11 12 13 14 15 16 17 18 Q3 19
While prime office yields have come in, some investors
Note: Figures are provisional as at 30 October 2019. still see scope for at least a little more growth: “Yields for
assets that would be 3.6 percent in Brussels would be 3.8
Luxembourg to 4 percent in Luxembourg. There is still value there, but
All-property return, 2009–2017 at some point you will need to be careful,” says a pan-
European developer.
MSCI does not produce an index for Luxembourg.
Another adds: “In the last six to eight months Luxembourg
has got interest both from value-add and from core-plus
capital. I think people see that is still sustainable, with
possibly some further upside both on the yield and on the
rental basis.”

Zurich (17)
As ever the challenge for investors in Zurich is to unearth

Investment prospects: local outlook, 2010–2020 value in the face of enduringly high prices. “It is a very stable
market and very difficult to acquire assets. We acquired
Excellent
one value-add property which needs a lot of work, but that
is what you have to do, or you can get hardly anything in
Good Zurich,” complains an interviewee.
Fair Swiss institutional investors’ portfolios are already heavily

Zurich
weighted towards domestic real estate, and they are reluctant
Poor to moderate their return expectations, says an investment
manager. “They would rather go up the risk curve and team
Very poor up with us to do development rather than allow lower returns.
Year 10 11 12 13 14 15 16 17 18 19 20 The larger core funds can allow themselves a bit more
exposure to risk.”
Note:
Note: The
The local
local outlook
outlook is
is based
based on
on scores
scores given by respondents
given by respondents who
who are
are familiar
familiar with
with the
the city.
city.
The local knowledge required to source assets deters non-

Zurich
domestic capital, suggests a broker: “There are very few
Transaction volumes, 2010–Q3 2019 international investors in Switzerland, despite high interest.
Investor feedback is that they do not know enough about
(€bn)
local specifics.”
1.6
Even in alternative sectors there is little let-up in the

1.2 competitive pressure: “The sectors that are called niche
are not niches anymore. The investors know them and are
actively looking for them. Not only the specialists invest in
0.8
those, now everyone is searching.”
0.4 Zurich ranks second in Mercer’s list of the most liveable

global cities: “Here in Zurich I hardly use my car. I just cycle
all the time. You have all these public bikes and it is very
0.0
10 11 12 13 14 15 16 17 18 Q3 19 convenient,” says a local. “I believe residential in Zurich’s
Source: Real Capital Analytics inner suburbs will do tremendously well. There is hardly any
Note: Figures are provisional as at 30 October 2019. new supply.”
Zurich
The strength of the Swiss franc on currency markets is
hurting the country’s retail sector, however: “People are used
% to going to shop in Germany, France and Italy. It is just 45
12 minutes from Zurich to Konstanz in Germany, and if you go
there you see all the shoppers are Swiss.”
8
4 Some interviewees believe corporate tax reforms that were

approved by referendum in May 2019 will boost the Swiss
0 economy: “Regulation reducing tax rates for SMEs will make
the country more attractive to businesses and will have an
-4
indirect positive impact on the real estate market.”
-8
-12
9 10 11 12 13 14 15 16 17
Source: MSCI

Stockholm (18)
Stockholm is frequently cited as one of the most dynamic

Investment prospects: local outlook, 2010–2020 cities in Europe, prized for its stable and liquid real estate
market, which is powering on despite a slowdown in the
Excellent Swedish economy.
Good Stockholm The investment market is busy, with SEK 90 billion trading in
the first half of 2019, higher than in most recent years. This
Fair is partly due to an increase in logistics transactions, which
jumped to 22 percent of the total volume. The trigger has
Poor been Nordic firms releasing stock via several big portfolios;
these were pounced on by international buyers keen to get
Very poor footholds in the region in this sector.
Year 10 11 12 13 14 15 16 17 18 19 20
One portfolio in particular, “by far the best available in
Note:
Note: The
The local
local outlook
outlook is
is based
based on scores given by respondents who are familiar with the
the city.
city. Sweden”, was keenly fought for, selling for a record low yield
of 4.3 percent, which almost puts Sweden’s prime logistics
Stockholm
on a par with Germany’s. “We had rarely seen anything under
5 percent in the Nordics before,” says a regional adviser.
(€bn)
4 As with logistics, the challenge for the many fans of the
capital’s office market is finding assets. “We haven’t yet
seen an investment at below 3 percent in the Stockholm
3 city office market,” the adviser reports. “But that’s due to
lack of product. If we were able today to get one of the best
buildings on the market it would probably go below 3 percent
2
and probably close to 2 percent. We’ve had multiple buyers
make approaches for those buildings, but they are just not
1 for sale.”
Forward-funding opportunities offer an alternative, especially

0
10 11 12 13 14 15 16 17 18 Q3 19 in urban submarkets where speculative space is letting ahead
Source: Real Capital Analytics of completion. One of these, Arenastaden in Solna, is also
notable for an initiative called the Last Mile Logistics project,
designed to make deliveries more efficient and cut traffic.
Stockholm
Landlords and occupiers are working with the city’s Urban
Services Initiative using an app that co-ordinates vehicles
% taking goods and waste in and out of the area.
18
Stockholm’s strong population and job growth also underpins
12 demand for other sectors, particularly residential for rent.
6 Locals say that while overbuilding of high-priced apartments
continues to be an issue, there will be increasing demand
0 for build-to-rent that is decently priced, and there is a
big shortage.
-6
-12
“International buyers have worked to understand the different
regulated markets,” says one Nordics player, adding that they
-18 are also bringing expertise in student housing.
9 10 11 12 13 14 15 16 17
Source: MSCI

Copenhagen (19)
In what may be a sign of the times in Europe, Denmark’s new

Investment prospects: local outlook, 2010–2020 centre-left coalition government has appointed the country’s
first-ever minister for building and housing.
Excellent
“This means that the Danish government is now showing
Copenhagen more interest in the Danish real estate market and is likely to
Good
enact a number of reforms,” one Nordics respondent says.
Fair
Another is more blunt: “Private equity firms have been buying
Poor regulated apartment buildings in Denmark with the idea of
refurbishing and pushing the rents, and it has been very
Very poor much criticised in public. There is some political discussion
of limiting landlords’ ability to do that.
Year 10 11 12 13 14 15 16 17 18 19 20
Note: The local outlook is based on scores given by respondents who are familiar with the city. “I think that is one of the biggest changes in the political
environment in the Nordics for quite some time. They see
Copenhagen
what’s happening elsewhere in other countries, such as
Transaction volumes, 2010–Q3 2019 Berlin in Germany.”
(€bn)
4
Statistics suggest that the effects of this uncertainty may
already be starting to play out. Copenhagen has been a key
market for intra-Nordic and international capital investing in
3 rental residential in the last few years, coming second only
to Berlin last year. However, in the first half of 2019 total
transaction volumes in Denmark declined by 40 percent,
2
and investment by foreign buyers almost halved compared
with 2018.
1
Most of the decline was caused by fewer residential
deals, which fell by 30 percent. In 2018 the government
0
10 11 12 13 14 15 16 17 18 Q3 19 introduced tighter lending standards to reduce the risk of a
Source: Real Capital Analytics housing bubble. Nonetheless, locals urge caution around
the residential market. Developers are building a lot of
new housing in Copenhagen, and locals say that there is
Copenhagen a mismatch in the size of apartments. Many are large, but
All-property return, 2009–2017 tenants want smaller units because they cannot afford
larger ones.
%
9
Many respondents feel the best opportunities in Denmark’s
6 capital will be office and logistics. Offices are seen as
promising because they are priced lower than in Stockholm
3 and Oslo but with a similar shortage of supply of modern
stock. “There is a need for more logistics due to economic
0 activity and expanding e-commerce,” says one adviser.
Industrial/distribution vacancy is at its lowest for years, and
-3
international investors are particularly interested.
-6
-9
9 10 11 12 13 14 15 16 17
Source: MSCI

Prague (20)
“Prague is a beautiful city and a developed market. Rents

Investment prospects: local outlook, 2010–2020 are high but not that fast-growing, and yields are at western
European levels,” says a regional investor. The Czech capital
Excellent is generally viewed as less volatile than Warsaw or Budapest,
but for investors seeking a bit more yield or to benefit from
Good rapid growth, it is unexciting when compared with its CEE
neighbours. “The volume of transactions for the last 12
Prague
Fair months was pretty low. People are holding onto the assets
they have, and there is little development.”
Poor
Take-up in the office market was also relatively subdued in
Very poor the first half of 2019: “There are not too many new tenants
Year 10 11 12 13 14 15 16 17 18 19 20 coming to the city. It is always the same tenants moving
Source: Emerging Trends Europe survey 2020. around, so the demand is not that high for brand new offices.
is based
Note: The local outlook is based on
on scores
scores given
given by
byrespondents
respondents who
whoare
arefamiliar
familiarwith
withthe
thecity.
city. Like Warsaw, it is becoming more of a market for rented
residential, and there are companies developing apartments
Prague
for lease.”
(€bn) Says another: “Prague has its own character, and lots of
3 people love to live and work there. It is a tourist destination
and a really attractive city.”
Yields for prime offices in the city centre are already as low
2
as 4.2 percent, and the price tag on many assets is too dear
for investors with high return expectations. However, Prague
still holds attractions for capital prepared to take a long-
1 term view, argues the investor: “We are not shy to buy new
assets because we foresee cap rates falling further. Warsaw,
Prague and to some extent Budapest will be more like Vienna
and Frankfurt.”
0
10 11 12 13 14 15 16 17 18 Q3 19
Source: Real Capital Analytics The same investor predicts that there is also scope for rental
Note: Figures are provisional as at 30 October 2019. growth: “Rent levels are generally €250 per square metre
per annum or below. Compare that to the levels in western
Prague European cities, and there is still the chance of a significant
All-property return, 2009–2017 upside. We are convinced that future will come, and we want
to be part of it.”
%
12
-4
-8
-12
9 10 11 12 13 14 15 16 17
Source: MSCI

Helsinki (21)
Helsinki continues to offer advantages over many other

Investment prospects: local outlook, 2010–2020 European capitals as it is less advanced in the real estate
cycle. Rents are still recovering, and investments are not
Excellent
as expensive.
Helsinki
Good South Korean buyers, hunting for well-let buildings at yields of
circa 4 percent and above, have been circling the city and are
Fair tipped as competitive bidders for one of the largest-ever single
office sales in the Nordics, which is expected to trade in 2019.
Poor
“The dominant source of capital in Finland has overwhelmingly
Very poor been international rather than domestic,” says one local
Year 10 11 12 13 14 15 16 17 18 19 20 adviser. “The depth of Korean capital is just tremendous, and
the US private equity houses are also very active. We see
outlook is
based on
on scores
scores given
given by
byrespondents
respondentswho
whoare
arefamiliar
familiarwith
withthe
thecity.
city. Europeans buying, and we are seeing Singaporean investors
in bidding processes. Even Australian investors are exploring
Helsinki our market.”
International investors focus on the city centre and locations
(€bn) in the Helsinki Metropolitan Area that have mixed-use and
5
good transport infrastructure such as Tripla and Pasila to the
north and the 100-hectare Jatkasaari district, one of Helsinki’s
4
largest urban developments under construction, as a western
extension to Helsinki city centre.
3
“What is interesting is that we have seen a marked increase

2 in investing in Finnish residential,” adds another local player.
“That sector is expanding with the first examples appearing of
1 diversified kinds of apartment living like serviced apartments,
extended stay or commercial student living. This is new here,
0 and it is being introduced by international players.”
10 11 12 13 14 15 16 17 18 Q3 19
Note: Figures are provisional as at 30 October 2019. Investors in rental residential are watching Finland’s new left-
wing government closely because the topic of affordability
Helsinki
is high on its political agenda. “I think that is a risk to our
business in the residential sector,” one interviewee warns.
MSCI does not produce an index for Helsinki.

Logistics, he says, is “a bit different” from the more centrally
located Nordic markets of Sweden and Denmark, and
Finland’s investible stock is small. “But if anything is up for
sale, interest is healthy.”
Retail could be challenged in the next few years as about

200,000 square metres of new space is coming on stream,
intensifying competition for tenants and shoppers. Rents have
fallen, and shopping centre vacancy is slightly up.

Rome (22)
In terms of residential, logistics and office – the most popular

Investment prospects: local outlook, 2010–2020 sectors targeted by Emerging Trends Europe’s respondents –
Rome’s real estate market continues to play second fiddle to its
Excellent northern rival.
Good “Today there is a 30 percent gap in values compared to Milan,

apart from hotels,” says a large Italian institutional investor.
Fair Prime CBD office rents in Rome are €430 per square metre per
Rome
annum, and prime yields are 3.75 percent compared to €600
Poor and 3 percent in Milan.”
Very poor Rome’s underperformance is blamed on two continuing

Year 10 11 12 13 14 15 16 17 18 19 20 frustrations: the lack of transparency and its city leadership.
“Rome is blocked, and the reason is strongly related with the
Note: The
Note: The local
local outlook
outlook is
is based
based on
on scores
scores given
given by
byrespondents
respondents who
whoare
arefamiliar
familiarwith
withthe
thecity.
city. lack of strategic vision,” says a global investment manager.
Rome
However, local players who know how to work with these
constraints and more adventurous international capital,
particularly from the US, are active. The market in 2019 has
(€bn)
been a little more dynamic, and there is competitive bidding
2.5
for opportunities. Players are looking for the same product as
2.0
investors in other European cities: buildings to refurbish to grade
A specification. “That market is not so crowded compared to
German cities. We think that wave is now coming to Rome,”
1.5
says one. Italy’s capital is strong on hotels and – selectively –
1.0 retail. Institutional investors with sound knowledge of Italian
shopping continue to buy into big malls, examples being the
insurance/pension fund money behind trades in GranRoma and
0.5
Parco Leonardo.
0.0
10 11 12 13 14 15 16 17 18 Q3 19 Last year’s predictions that Italian hotel investment would take
off due to growing tourism combined with pent-up demand
Note: Figures are provisional as at 30 October 2019. from big brands proved correct. Italian credit information firm
CRIF says 42 percent of transactions in H1 2019 were in the
Rome
hospitality segment, more than half from foreign investors
focused on Rome. “Rome is a city where we see good growth
%
prospects: there is a big lack in the offer of luxury hotel brands,”
6 says the CEO of an Italian investor. However, he adds: “The
problem is that more or less 85 percent of hotels are owned by
4 families, with price expectations that are too high.”
2
Italy’s real estate market “is still bank centric”, and banks
0 are choosy about what they will fund. For investors with
relationships with foreign banks, debt is relatively cheaper, but
-2 Italian banks are still weighed down by €170 billion of bad loans
and require higher spreads, even for core investments, or very
-4
high levels of pre-letting or pre-sales for development.
-6
9 10 11 12 13 14 15 16 17 “Our investments are mainly financed through equity, and
Total return Capital growth Income return more and more we are seeking joint ventures with institutional
Source: MSCI investors,” says another Italian CEO.

Manchester (23)
“I can’t see anything other than Brexit that would put people
Investment prospects: local outlook, 2010–2020 off the UK regional markets. Economically there isn’t much
difference between UK and European GDP. It is the political
uncertainty that investors can’t ignore.”
Excellent
Good Manchester Without that hindrance to cast a shadow over Manchester’s

prospects, they might be seen in a much more favourable
Fair light because the city’s now well-entrenched reputation
as the UK’s up-and-coming conurbation still endears it
Poor to some investors. “It is a thriving city in many ways and
benefits from having a large airport with two runways. It has
Very poor a pretty progressive council and now has a metropolitan
Year 10 11 12 13 14 15 16 17 18 19 20
mayor, and there has been a strong vision around town
planning. We would be happy to invest there,” says a pan-
Note: The
Note: The local
local outlook
outlook is
is based
based on
on scores
scores given
given by
byrespondents
respondentswho
whoare
arefamiliar
familiarwith
withthe
thecity.
city. European manager.
Manchester Interviewees identify the office market as particularly fertile

Transaction volumes, 2010–Q3 2019 ground for investment. Vacancy is low, and rents show
potential to grow beyond their mid-2019 headline level
(€bn)
of £393 per square metre per annum in 2020 thanks to
3.0
continued demand from a solid tenant base. “In Manchester
you have local law firms and other mid-sized companies,
2.4
but also bigger businesses which serve the local market,
which is what we like to see. We still do a lot of offices in
1.8
Manchester, but we wouldn’t do retail there,” says another
European investor.
1.2
In some circumstances, market dynamics in the sector
0.6 are healthy enough to overcome concerns about the wider
political climate, says an overseas investor. “We’ve done
0.0
10 11 12 13 14 15 16 17 18 Q3 19 a lot less over the last two or three years in the UK as a
consequence of Brexit. And what we’ve done has been
Note: Figures are provisional as at 30 October 2019. done very, very carefully and well supported by some really,
really strong fundamentals, and the regional office market
Manchester has those.”
So far, Manchester’s residential market has been spared
% the price falls and stasis seen in London; JLL identifies
18
the city’s centre as the most attractive UK residential
12 market with a 4.5 percent average price growth forecast
over the next five years. With four universities in Greater
6 Manchester, the city has one of Europe’s largest student
populations. Purpose-built rental blocks to accommodate
0
the booming number of students and young professionals
-6 now account for a significant proportion of the city centre’s
development pipeline.
-12
-18
9 10 11 12 13 14 15 16 17
Source: MSCI

Birmingham (24)
Emerging Trends Europe’s respondents’ views on

Investment prospects: local outlook, 2010–2020 Birmingham are a microcosm of the prevailing sentiment in
Brexit Britain’s commercial property market: optimism about
the resilience of the office sector, gloomy reflections on
Excellent
retail decline, faith in the potential of rented residential and
Good
confidence in logistics tinged with caution over the uncertain
future faced by the nation’s exporters.
Birmingham
Fair
“Birmingham has had relocations out of London like HSBC,
Poor which has moved a lot of staff there, and that has produced
quite a lot of demand for offices,” says an institutional
Very poor investor. “Not much has been built, so there is very little
supply. The CBD in Birmingham has been relatively contained
Year 10 11 12 13 14 15 16 17 18 19 20
because it is quite a small area. If you are not in the CBD then
Note: TheEmerging
Trends Europeon scores
survey given by respondents who are familiar with the city.
2020.
Note: The local outlook is based on scores given by respondents who are familiar with the city. forget it, but if you are, then it is quite a nice market to be in. It
is well-defined so you aren’t likely to get many wrong bets.”
Birmingham
Transaction volumes, 2010–Q3 2019 The influx of young office workers has generated demand
for purpose-built private rented apartments. Several such
(€bn)
developments are underway in the city centre, creating
3.0
opportunities to finance. “We’re providing debt in places
2.5
where the market is less liquid. We lent to a PRS development
project in Birmingham where we were providing senior
2.0 secured credit at the returns our credit fund needs,” says
a financier.
1.5
1.0
Investor appetite for logistics assets has never been sharper,
and Birmingham’s well-established warehousing sector
0.5 remains highly attractive. However, a disorderly EU exit
together with declining order books could hit the automotive
0.0 industry, one of the city-region’s most important sources of
10 11 12 13 14 15 16 17 18 Q3 19
occupational demand. “In Birmingham and the wider West
Note: Figures are provisional as at 30 October 2019. Midlands there could be a negative impact because of the
weak state of the car industry,” warns an interviewee.
Birmingham
All-property return, 2009–2017 Meanwhile Birmingham’s retailers are suffering the effects
of the headwinds facing the sector at large. In September
% 2019, department store chain Debenhams announced it
18
would close its Birmingham branch, and the premises of rival
12 House of Fraser in the city centre are already earmarked for
redevelopment, primarily for offices. Notwithstanding value
6 write-downs, the market for the region’s shopping centres is
thin. “A mall 25 miles outside of Birmingham anchored by a
0
House of Fraser and a Next, that is super-tough. There are
-6 some things in retail you would be prepared to do, and some
that you wouldn’t at almost any price,” says a private equity
-12 fund manager.
-18
9 10 11 12 13 14 15 16 17
Source: MSCI

Edinburgh (25)
As with other UK regional markets, Edinburgh’s prospects

Investment prospects: local outlook, 2010–2020 are obscured by political uncertainty. “We are active in
Manchester and Birmingham and we are about to acquire an
asset in Edinburgh, but they are all under the cloud of Brexit,”
Excellent
says an international investor.
Good Edinburgh
And yet the Scottish capital was lively in the first half of 2019,
Fair with almost £310 million of office property traded. Much
of that total was accounted for by two transactions of over
Poor £100m, in which the buyers were a German pension fund and
a South Korean investor, demonstrating that at least some
Very poor overseas capital is still in the market for substantial assets.
Year 10 11 12 13 14 15 16 17 18 19 20
Edinburgh’s broad-based economy remains a draw. “We
Note: The
Note: The local
local outlook
outlook is
is based
based on scores
city. will continue to invest significant money in hotels and
offices there. It is partly tourism; it is a big tourist centre,
Edinburgh but it is also because the local economy has managed to
Transaction volumes, 2010–Q3 2019 diversify its occupier base away from financial services
in recent years,” says a UK investor. “While it is still the
(€bn)
second largest financial services hub in the UK, it has quite
2.0
a large range of other sectors, so it is more robust from an
occupational perspective.”
1.5
Prime office yields stand at 4.5 to 4.75 percent. “Prices never
got too silly either,” continues the investor, “partly because of
1.0
the whole worry about Scottish independence. That worried
quite a lot of UK investors and they probably remain a bit
0.5 worried, so there is not quite as much competition for assets,
and on a relative value basis it looks quite good.”
0.0 UK regional office markets where there has been little

10 11 12 13 14 15 16 17 18 Q3 19
development still offer opportunities to provide modern
Note: Figures are provisional as at 30 October 2019. offices to meet latent demand, observes a pan-European
fund manager. “Edinburgh is one of those markets where
Edinburgh
supply is very tight. There are a couple of big schemes
All-property return, 2009–2017 coming forward, but there is a dearth of grade A space and
the demand side drivers are there.”
%
15
Other sectors present a mixed picture, however. “Leisure
10 associated with the tourist trade is buoyant, but mainstream
retail is weak at the moment,” says the fund manager.
5
The 79,000 square metre retail and leisure element of the
0 Edinburgh St James mixed-use scheme in the city centre is
due to complete in 2020, and its letting performance will be
-5 closely watched.
-10
-15
9 10 11 12 13 14 15 16 17
Source: MSCI

Lyon (26)
Lyon continues to earn its right to be France’s undisputed

Investment prospects: local outlook, 2010–2020 second city. “Well-rounded, with talent, clusters and scale,”
according to one pan-European investor.
Excellent
Its main pull is the many European businesses, from
Good start-ups to around 150 listed companies, which have
headquarters here; the broad base of its industries includes
Fair Lyon
pharmaceutical, bio-tech, healthcare, engineering, textiles,
technology and R&D. It is France’s second-largest digital
Poor hub after Paris and has world-class universities with 300,000
students in the region.
Very poor
Year 10 11 12 13 14 15 16 17 18 19 20
Lyon’s transparent property market and stable rental values
also make it a “safe haven” for the investors who like it. “It
Note: The local outlook
outlook is
is based
based on
on scores
scores given
given by
byrespondents
respondentswho
whoare
arefamiliar
familiarwith
withthe
thecity.
city. is a really transparent, well-organised market compared
to Bordeaux or Toulouse,” explains one French investment
Lyon manager. “In Lyon you know if you want to buy a HQ you
Transaction volumes, 2010–Q3 2019 go to Part-Dieu; if you want a new building you go to
Confluence; for bio-tech you go to Lyonbiopôle; for R&D you
(€bn) go to Gerland; or for electronics or technology or accounting
1.2 you go to Vaise.”
0.9 The city prides itself on being “smart” about growth. An

example is the urban “logistics hotel” in south Gerland in the
Edouard-Herriot port on a 48,000-square-metre site served
0.6 by river, rail, road and pipeline. It was launched recently
in response to new consumer trends and e-commerce,
facilitating goods distribution and last-mile delivery in the city.
0.3
Another is the redevelopment in Part-Dieu to turn the historic

0.0 office district into a mixed-use urban centre: “When you
10 11 12 13 14 15 16 17 18 Q3 19
arrive by train at Part-Dieu you immediately see how fast
Note: Figures are provisional as at 30 October 2019. everything is changing – it really feels dynamic,” says the
French investment manager.
Lyon
All-property return, 2009–2017 Retail, restaurants and bars thrive in the main shopping
streets in Presqu’île and the recently opened Grand Hôtel-
%
15 Dieu, and have been included in newer growth districts like
Confluence as well as at the extension to Part-Dieu shopping
10 centre, which opens in 2020.
5
Although an interviewee who targets gateway cities says:
0 “We don’t invest in Lyon; it’s a question of scale and focus”;
others say the city’s seven million square metres offer
-5 enough scope. “However, prices are going a bit crazy,” says
one. “If you have a new or refurbished building in the CBD
-10 you break 4 percent easily.”
-15
9 10 11 12 13 14 15 16 17 This is eroding the spread in Lyon’s yields over Paris. The
Total return Capital growth Income return difference is the cost per square metre, with rents in Lyon
steady around €300 per square metre per annum, against
Source: MSCI €500 or €600 for similar stock in the capital.

Budapest (27)
Once again, the decisive factor in Emerging Trends Europe

Investment prospects: local outlook, 2010–2020 interviewees’ verdict on Budapest is whether they are put
off by Hungary’s political environment or hooked by the
country’s robust economic growth and the strong property
Excellent
fundamentals evident in its capital city.
Good
In the former group is a pan-European player who perceives
Budapest “significant risk” that “the government, led by Viktor
Fair
Orbán, affects the direction of the country in Europe and
Poor significantly impacts local business”. Nonetheless, they are
still pursuing some projects in Budapest where they see “very
Very poor strong potential” because of high demand for office space.
Year 10 11 12 13 14 15 16 17 18 19 20 Meanwhile an investor in student accommodation fears that
“political issues” would have too great an impact on end
Source: Emerging Trends Europeon scores
2020.
Note: The local outlook is based on scores given by respondents who are familiar with the city. users. “That is why we are not doing anything in Hungary.”
Budapest One CEE investor remains on the fence: “We are not as
Transaction volumes, 2010–Q3 2019 enthusiastic about Budapest as Prague and Warsaw, but only
in comparison. Budapest is fine. Cap rates are still higher,
(€bn)
and the political situation is a little less predictable than
1.5
Poland and the Czech Republic. It is not bad, but not super.”
1.2
For another, projected GDP growth of 4.6 percent in 2019
and a slower, but still healthy forecast of 3.3 percent for 2020
0.9
trumps civic considerations: “People might have their own
point of view on the politics, but from an economic point of
0.6 view Hungary is doing extremely well; it has a great growth
rate, low unemployment, good pricing dynamics. Wages are
0.3 coming up and that creates inflation from a real estate point
of view, and this market should do well.”
0.0
10 11 12 13 14 15 16 17 18 Q3 19
Office vacancy in Budapest stood at an all-time low of 6.3
Note: Figures are provisional as at 30 October 2019. percent at the end of the second quarter of 2019, prompting
Budapest a supply-demand dynamic that looks likely to lead to cap rate
All-property return, 2009–2017 compression. In that context, entry prices that are lower than
those found in most other CEE locations remain tempting for
% some investors in the region. “You can buy pretty good office
18 buildings at attractive yields of between 6 and 7 percent.
There are not so many opportunities available, but if you have
12
a stable local network, you always get the chance to find
6 nice product.”
-6
-12
-18
9 10 11 12 13 14 15 16 17
Source: MSCI

Athens (28)
Greece and its capital city are not out of the woods yet, but
Investment prospects: local outlook, 2010–2020 a slow recovery is underway and interviewees in Emerging
Trends Europe are more upbeat about the city’s prospects.
Excellent
“In Greece there is equity interested in prime, core investing
Good in Athens, and there is opportunistic international capital
which is mainly available for office, retail and hotels/tourism
Fair and for buying distressed debt and NPL portfolios,” says a
regional player.
Poor
Local real estate players are heartened by the noises coming
Athens
Very poor from the new centre-right government which is perceived as
Year 10 11 12 13 14 15 16 17 18 19 20 more investor – and business – friendly. Although promises
Note: TheEmerging
Trends Europeon scores
2020.
to cut taxes and introduce investment incentives are yet to be
Note: The local outlook is based on scores given by respondents who are familiar with the city. negotiated with Greece’s creditors, the new administration
passed measures to stimulate real estate investment, such as
Athens reducing annual property taxes.
It has also has vowed to push on at once with the
(€bn)
redevelopment of Hellinikon, the vast former airport site south
0.15
of central Athens, mooted for 10 years. “Unlocking this site is
going to be a watershed moment and will spark interest from
0.12
other investors,” argues one interviewee.
0.09
Investors see offices as offering good prospects due to the
limited availability of grade A space and the deterioration
0.06
in quality of existing stock over previous years. Yields have
compressed to 7 percent, still at least 125 basis points
0.03 above values before the crisis. “Further yield compression
is expected in the CBD and northern suburbs, and yields
0.00
10 11 12 13 14 15 16 17 18 Q3 19 in second/third-tier office properties will be affected to a
Source: Real Capital Analytics smaller extent. So selective placement in second-tier offices
might also be interesting,” says a local investor.
Athens
All-property return, 2009–2017 Views on tourism are more mixed. Conversions to hotels or
to flats for holiday rentals were popular in the earliest stages
MSCI does not produce an index for Athens. of recovery, but several interviewees say visitor numbers are
dropping, partly due to competing regional destinations like
Turkey making a comeback. “Greece’s market appears to be
saturated, and most sellers’ asking prices are at high levels,
assuming similar growth to the last two years,” warns one.
International banks are not yet lending, and debt is more

expensive than in other European cities. But availability of
debt is expected to improve next year because after years of
moving at a glacial pace, Greece’s four systemic banks are in
a frenzy to sell off their NPLs by an end of 2020 deadline. As
one local player puts it: “It is another milestone.”

Oslo (29)
Norway’s economy is the leader in the Nordic region, and its

Investment prospects: local outlook, 2010–2020 capital’s property fundamentals are attractive. For a relatively
small market with limited expansion opportunities, it has proved
to be very liquid over the last 10 years.
Excellent
Good
Oslo Real estate prices in Oslo are high, but yields stabilised in 2018,
at 3.75 percent for prime office. Meanwhile rents are still rising.
Fair
The central office market extends roughly across the area
Poor between Vika and the developing Bjørvika waterfront.
“The rental price in Vika is more than 6,000 NOK per square
Very poor metre per annum, which is a record high,” says a leading
developer in the city.
Year 10 11 12 13 14 15 16 17 18 19 20
Note: The
Note: The local outlook is based on scores given by respondents
respondents who are
are familiar
familiar with
with the
the city.
city. Bjørvika, one of the largest waterfront projects underway in
Europe, is located next to Norway’s largest public transportation
Oslo hub and the Oslo Fjord and has already established itself as a
Transaction volumes, 2010–Q3 2019 new mixed-use CBD and cultural district.
(€bn) More tenants are making requests for co-working space,

5
sometimes alongside traditional leases, and WeWork entered
the Oslo market this year. Office parks around the periphery are
4
doing quite well, and there are opportunities to expand there,
according a Nordic adviser.
3
Both international and domestic investors are eyeing the
2 former Norwegian national television company’s site for Project
Marienlyst: “a great location which is going to be developed over
1 the next years as mixed use”.
0 Some interviewees feel that the interest from cross-border

10 11 12 13 14 15 16 17 18 Q3 19
investors in recent years is moderating slightly, although they
Note: Figures are provisional as at 30 October 2019. are still active: “The increase in foreign investments has slowed
down a little as foreign players have started selling some
Oslo properties,” observes the local developer.
Some foreign players could be affected by the limits the
%
15 government has introduced on deductions of interest costs.
However, exemptions are available if they can demonstrate that
10 they are not capitalised with lower equity in Norway than in their
other jurisdictions.
5
0
Interviewees flag housing as a big opportunity because of high
demand and restricted supply; developers complain about the
-5 regulatory process. “We are willing to pay more for land that
has completed regulation,” says a company director. Another
-10 interviewee concludes: “We believe in the concept of building
smaller apartments with a high service level – co-living premium
-15
9 10 11 12 13 14 15 16 17 solutions could be a winning concept in Oslo. But this is difficult
Total return Capital growth Income return with the housing regulations here.”
Source: MSCI

Istanbul (30)
“We are no longer doing new business here at all,” says

Investment prospects: local outlook, 2010–2020 the long-time head of an international firm’s Istanbul office.
“Availability of cross-border debt and institutional equity
continues to reduce.”
Excellent
Good
It is not hard to see why: the country’s unpredictable politics
and economic instability is having detrimental effects on
Fair Istanbul’s real estate market.
Istanbul Partly due to the breakdown in Turkey’s relations with the

Poor
United States, the lira’s fall has pushed up inflation to 19
Very poor percent and unemployment to 14 percent; GDP growth
contracted to an estimated 0.2 percent in 2019. “I think the
Year 10 11 12 13 14 15 16 17 18 19 20
economy is on a downhill trajectory,” says one experienced
by respondents
respondents who
who are
are familiar
familiar with
withthe
thecity.
city. adviser. “The market now is considered so risky that not
even very large private equity players will consider investing
Istanbul because they think it is a falling knife. They do not know
Transaction volumes, 2010–Q3 2019 where the distress will settle.”
(€bn) In an effort to help suffering occupiers paying rent in euros

1.2 or dollars after the lira’s collapse, the government issued
1.0 a decree (in September 2018) requiring all property lease
contracts in foreign currencies to be converted to lira.
0.8
Interviewees say this is hurting landlords, which now carry
0.6 a large currency risk, and impacts loan repayments and
cashflow, making valuations extremely difficult. One banker
0.4
says: “It was a turning point, because long-term lending on a
0.2 shopping centre or an office building, whether from overseas
or local banks, has always traditionally been in foreign
0 currency, in euros or dollars.”
10 11 12 13 14 15 16 17 18 Q3 19
Note: Figures are provisional as at 30 October 2019. The office and residential-for-sale sectors are suffering from
oversupply. In Istanbul, office vacancy is over 30 percent,
Istanbul
after releases of two very large newly-completed buildings.
All-property return, 2009–2017 Residential, the strongest part of the market in the last few
years, is also over-built, and developers are focusing on
MSCI does not produce an index for Istanbul.
getting rid of existing stock.
There is talk of distressed office assets coming to market

and a rising volume of non-performing loans. “In my opinion,
Turkey is brewing the next huge NPL crisis in Europe,” says a
regional manager.
The one bright spot is tourism. “Occupancy and rates are

up, both in Istanbul and in coastal resorts, after several very
difficult years,” says one interviewee. “Tourists have come
back, attracted by cheap prices because of the lira, and
Turkey’s reputation for hospitality and good service.”

Moscow (31)
“The biggest issue for Russia is one of politics,” opines an

Investment prospects: local outlook, 2010–2020 international investor/developer. Relations with the West
remain frozen, and there appears to be little chance that
Excellent economic sanctions will be relaxed in the near future.
“Economic growth and investment climate are linked to
Good sanctions,” adds another. “Internal resources are limited, and
Moscow the economy needs external capital.”
Fair
The geopolitical standoff has dried up liquidity in the real
Poor estate sector, says an international investor active in the
market: “Previously, when we exited buildings, we would have
Very poor one or two bids each from US, European and Asian groups
Year 10 11 12 13 14 15 16 17 18 19 20 and a Russian bid. Now for the most part it is just Russian
Source: Emerging Trends Europe survey 2020. bids, and there aren’t that many big institutions.
Note: The
Note: The local
local outlook is based on scores given by respondents
respondents who are
are familiar
familiar with
with the
the city.
city.
“Equity capital will continue to be limited, perhaps even more

Moscow
so. The Russian Direct Investment Fund, a Russian sovereign
Transaction volumes, 2010–Q3 2019 vehicle, is making some acquisitions through its partnerships
with Middle Eastern sovereign wealth funds that are investing
(€bn)
7
for political purposes. External capital in Russia will have a
strong political component to it.”
6
5
The volatility of the Russian currency is a further deterrent
to overseas investment: “Russia offers interesting deals,
4 but closing remains problematic due to rouble risk, which is
3 expensive to avoid,” says a pan-European fund manager.
2 The devaluation of the ruble has impacted the logistics

1 market in particular, says a local. “While warehousing has
been the flavour of the month in many places, it has moved
0
10 11 12 13 14 15 16 17 18 Q3 19 from a dollar rent basis to a ruble rent basis in Russia, which
Source: Real Capital Analytics means that in dollar terms the rents are down by 50 percent.”
In other sectors rents are paid in hard currency, but there is
Moscow continued uncertainty over whether the practice will persist:
All-property return, 2009-2017 “Will Russia continue to stay in dollars or euros for offices
and the best retail? I don’t know. I hope so.”
MSCI does not produce an index for Moscow.
If so, then for investors already established in Moscow,

the city at least offers the prospect of steady, and perhaps
increasing, cash flow. “The problems of equity financing or
even getting debt for construction, which is very constrained,
mean that supply has been minimal. It won’t take a whole lot
of economic growth for vacancy rates to fall pretty quickly,”
muses one. “We should see some rental growth in the next
two to three years in sectors where the vacancy rate falls
below 5 percent, but that won’t change the liquidity picture
so cap rates will likely continue to be elevated.”

Image: Moskva City, Moscow, Russia Emerging Trends in Real Estate® Europe 2020 73
Chapter 4
Getting smart about mobility

“We are excited about changes in mobility. We have a high
concentration of assets that are well connected to public
transport and well located. That will become ever-more
important as the way people travel changes.”
Director, pan-European REIT
74 Emerging Trends in Real Estate® Europe 2020 Image: Getty Images

Driven by rapid advancements Just as changing consumer behaviour This is an emerging trend for the
in technology both digital and is defining the concept of space as a real estate industry, and one that will
mechanical, transportation service – how we occupy, manage and require a change of mindset to factor
is going through some of its invest in real estate – the industry must in the growing complexity of transport
now contend with the implications of solutions into investment decision-
biggest changes in a century.
mobility becoming part of that service. making. But as the steward of the built
environment, the industry is in a strong
For so long cars have been a dominant
Well-connected buildings and places position now to influence how quickly
influence on our relationship with the
have always been the most valuable, certain technologies are adopted by
built environment. But now the cars we
but until now the real estate industry’s making them easier for consumers
drive are turning electric; one day we
influence has been passive, with control to access. This will be particularly
may not have to drive them at all and
resting mainly with the public providers important as investors continue to place
the concept of personal car ownership
of infrastructure and transport. Yet more emphasis on their environmental,
could largely disappear. Instead, the
as the range of transport solutions social and governance (ESG) activities.
flying vehicles of science fiction could
grows and as real estate becomes a
one day transport goods first, then
more outcome-driven and operational
people, as trials for vertical take-off
business, owners will have to think
and landing crafts take place around
smartly about their buildings’ overall
the world. Ambitious initiatives like
impact on the community: workers,
the sealed tube transportation system
residents, tourists and passers-by.
Hyperloop might reduce the need for air
travel and make it possible to live in one
European capital city and commute to
At a higher level, this shift will have The up-front cost
a significant effect on the way we
work in another.
use our cities. It has the potential to
of implementing new
change which buildings and districts infrastructure means
On a more low-tech level, bikes and
scooters, both conventional and
are seen as most valuable by real that smart mobility will
estate investors and developers. It is
electric, are changing the way we move
also likely to reinforce the attraction
be introduced first in
around cities and making areas away
from mass public transport hubs more
of mixed-use development, while dense and mixed-use
accessible to city dwellers. At the
challenging established principles areas where there are
around density, fixed or single-use
same time, smartphones have made
buildings and the traditional “hub and lots of potential users
cities easier to navigate and thus more
walkable; they can also enable us to
spoke” model for urban planning. At and customers.
the very least, developers and investors
find a taxi at the touch of a button, or to
can get inventive with all the space
share cars and scooters.
currently given over to parking, which
might not be required any more in a few
years’ time.

Chapter 4: Getting smart about mobility
Growing awareness Figure 4-1 Real estate and new mobility solutions
of mobility trends %
The real estate industry largely Smart mobility solutions should be an integral
acknowledges the need to understand part of any urban (re)development project
mobility trends – 80 percent of -1 7 55 37
respondents to the Emerging Trends
Europe survey say changes in mobility There is a potential/increasing role for real estate investors to participate
with the public sector in the delivery of smart mobility solutions in cities
are playing a part in their investment
decision-making. Transport connectivity -3 15 58 24
is seen as the most important factor
Emerging mobility/infrastructure solutions in cities play a
driving city selection. role in current investment decision-making
-4 16 51 29
Investment vehicles are already
emerging that look to take advantage The private sector should take a more active role in delivering
of these trends. Whitehelm Capital and and/or operating green infrastructure
APG launched a €250 million Smart City -2 -11 19 44 25
Infrastructure Fund in 2018, which is
investing in open-access infrastructure
projects that support “smart city”
Disagree strongly Disagree Neither/nor Agree Agree strongly
solutions such as smart lighting,
parking, waste collection and pollution Source: Emerging Trends Europe survey 2020
control. One investment manager
is looking to raise a fund to take
advantage of the rise in ride-sharing,
autonomous vehicles and “micro- Figure 4-2 Most attractive opportunity for smart mobility solutions
mobility” forms of transport, such
as bikes and scooters: “Institutional
investors are starting to wake up to
these trends, but it is slow.” 1%
49% 34% 16%
Another global investor says: “We are
thinking about these changes, but it
would not change where we invest or
what we buy so much, unless it was a Global cities Gateway cities Regional/ Other
secondary cities
direct investment in parking garages.”
This hesitant response to the effect of
the advances in transport is also borne
out by the survey revealing that any
innovation would have the most impact
in what are already considered as
traditionally successful locations. More
than 80 percent of respondents believe
that smart mobility solutions would
provide the most attractive investment
opportunities in global and gateway
cities. Just 15 percent believe these
trends would benefit investment most in
secondary or regional cities.

Cities benefit from Figure 4-3 Mobility/infrastructure's importance in new investment
better connections
Given that the most valuable real estate

today tends to be in the dense urban core
of major cities, it follows that prime real
estate will only increase further in value.
The cities and districts already attracting 49% 32% 19%
the lion’s share of global investment will
continue to do so as these buildings and
areas become even better connected.
Asset selection City selection Submarket selection
“The up-front capital cost of
implementing new technology and
infrastructure means that smart mobility
will be introduced first in dense and When making new investments, nearly And among smaller cities, Copenhagen is
mixed-use areas where there are lots half of respondents say they look at lauded for transport and urban planning
of potential users and customers,” one mobility/infrastructure factors at the asset policies working in a cohesive way,
investor explains. “That means these level. A third of them assess mobility and increasing its appeal for companies and
solutions are going to the downtown infrastructure when deciding in which residents, and thus for investors too.
areas of the big cities first, so you can cities to invest. Clearly, as real estate These factors have helped attract foreign
earn back that initial investment fastest, continues as a global, cross-border investment and have been mentioned
and it means cities will get even denser.” industry, cities have the opportunity to frequently by interviewees over the past
differentiate themselves by improving few years.
their transport and mobility policies. Many
interviewees speak about the increased “Copenhagen is a blueprint city for other
appeal of Paris given the improvements to capitals in Europe,” one investor says.
transport infrastructure as a result of the “Almost a third of employees there go to
Grand Paris project. work by bike.”
Image: Bicycle path on the road, Copenhagen, Denmark Emerging Trends in Real Estate® Europe 2020 77
Image: Getty Images
Industry leaders canvassed for Emerging “In general, we expect cities to become
Trends Europe believe changes in the way more polycentric as mobility options
we move around cities will accelerate the become more diverse than today,” the
We anticipate Hyperloop trend towards more mixed-use buildings investor adds.
and districts. “We’re still big believers
stations being large in mixed use,” one global investor says. The “hub and spoke” model of city
mixed-use schemes. “Not everyone will want to live in city development could potentially be
centres, there will still be people who challenged. “We see our biggest impact
Imagine having an want space and to live in the suburbs, being in suburban areas, where we can
airport, with all the but we feel the trend for people wanting connect places that are currently difficult
connectivity benefits that to live, work and play in the same place to get between by public transport,” says
will continue.” an executive from an autonomous vehicle
brings, and bringing it into technology company.
the middle of a city. It is a long way off, but in a world where
people are less reliant on private cars Further into the future there is Hyperloop,
or public transport because ride hailing, which was originally promoted by
autonomous vehicles and micro-mobility entrepreneur Elon Musk but is now
have decentralised transport, density moving forward through separate
can emerge in different places. There organisations collaborating with local
will be the potential for the kind of universities and businesses in the US,
mixed-use districts that currently exist Europe and Asia. Hyperloop has the
solely in dense urban centres with large potential to transform the real estate
transport hubs to be distributed around profile of cities connected by the system
cities more evenly, opening up new areas – and to make the property around the
for development. stations incredibly valuable. “We would
anticipate Hyperloop stations being very
large mixed-use schemes that would
attract people and businesses towards
them,” one architect says. “Imagine
having an airport, with all the connectivity
benefits that brings, and bringing it into
the middle of a city.”

As competition intensifies to attract Achieving target returns will require more engagement in the operational aspects of real estate
occupiers and generate footfall, buildings
are also more likely to be of mixed
use, with retail, office and residential
properties incorporating logistics delivery
37% 53% 8%
facilities. But to appeal to occupiers 1%
Agree Neither/nor Disagree Disagree
“buildings themselves must be integrated Agree strongly
strongly
with the transport system to allow ease of
use by occupiers”, one developer says.
The smartphone has become the key Real estate companies are ideally placed
element of mobility, a development that to integrate multiple transportation and
will only increase. Google Maps can mobility solutions in a single digital
already plan your journey using public platform that they provide to the users Employees are carefully
transport, and soon it will tell you where of their buildings, to make their assets
the nearest shared bike or scooter is as as accessible and therefore as valuable
looking at the time they
well. Municipal transportation bodies as possible. spend on their commute,
across the world are also set to include and if you can add sport
ride-hailing and micro-mobility solutions The broader implications for the real
on their apps and websites if they offer estate industry here are perhaps best
and wellbeing to that
travellers the quickest or cheapest option. illustrated by the office sector. An through cycling it is
outcome-based approach to investment attractive to them.
The same thought process will need to and management would recognise that
be applied to real estate as buildings the ultimate user of an office building is
become operating assets and their the employee, but that employee’s overall
managers become, in effect, operational working-day experience is determined
businesses. This can be as simple as by numerous factors. Time spent in the
a screen showing the next train leaving office is an important but diminishing
the nearest station, through to landlords aspect of work whereas the duration of
providing bikes or scooters, or building commute, connectivity to the office when
apps that connect to the wider mobility working remotely and experience on
network to plan your journey to and transitioning to the office are all starting
from the workplace. In Norway, for to matter more to employees.
instance, investors have teamed up with
car hire company Hertz to give office In the competition for talent, some of
occupiers access to the company’s these experiences are best controlled by
car-sharing service. the corporate employer and some by the
operator of the workplace. The blurring
“We are experimenting with car-sharing of these boundaries is already evident
and cars that you can book,” an investor in the new generation of asset-light
there says. “Employees are carefully office operators, such a Knotel and
looking at the time they spend on their Convene. And as the interviews for
commute, and if you can add sport and Emerging Trends Europe indicate, there
wellbeing to that through cycling it is is an expectation of more overlap and
attractive to them.” collaboration between employer and
office owner going forward.

Logistics on the Logistics also has a crucial part to play Other more futuristic technologies are
in reducing congestion and pollution also likely to influence logistics. British
frontline of change in cities. UK government research online grocery chain Ocado is working
shows that while the growth in car with a start-up called Magway on a
Some of the more radical changes journeys is slowing, van journeys are version of the Hyperloop transport
in mobility are likely to occur first in increasing, and this is causing the system, which would deliver goods
the transportation of goods rather overall volume of traffic to rise after a through a network of underground
than people, which means investors period of relative stability. Cities and tunnels. The publicly funded Old
in logistics must be ready for the real estate owners are already working Oak and Park Royal Development
implications. “It is far easier to predict together to relieve pressure on roads Corporation, which is overseeing the
the changes in business-to-business by creating centralised distribution development of thousands of homes
sectors, like logistics, than in sectors strategies. In London, the West End in north west London, is also a partner
that involve public consumer choices,” Partnership brings together public and and could provide a site for testing
one global investor says. “The way private sector stakeholders to reduce the technology.
people adapt to change is very hard freight and deliveries coming into
to predict, but the way businesses will central London. SoftBank, the Japanese technology
react is easier, as ultimately profitability investor, recently backed a funding
and efficiency are key.” Forward-thinking developers also have round for US robotic delivery
the ability to combat this trend. The company Nuro.
For that reason, the expectation is that owner of one office park in Stockholm
autonomous vehicles will become widely is controlling all goods vehicles going But the real estate industry must
used in logistics before they are used in and out of the area. “If you want to think vertically as well as laterally. US
to transport people. The routes from deliver there, you have to go through an company Skyports is partnering with
warehouse to warehouse are predictable app that co-ordinates all the distributions developers in Los Angeles, Singapore
and therefore easier to automate, into that area,” an investor says. “Over a and London to allow drone deliveries to
compared with the myriad journeys couple of months, they have got rid of 80 the roofs of commercial and residential
taken by individual travellers. There is percent of all the traffic.” buildings. Uber is working on “aerial
a clear profit and efficiency motive for ridesharing at scale” and claims its
logistics firms to dispense with drivers, Having specific delivery facilities vertical take-off vehicles could be
albeit this will of course have a wider integrated into residential and operational within five years.
social impact. commercial buildings means that
delivery vans do not block roads, with All of this presents a challenge and
“We think this would concentrate value engines idling and producing carbon an opportunity to building owners. If
even more in prime logistics markets,” emissions. And under pressure from goods and people arrive at the top of
one investor says. “There would be little consumers, big e-commerce companies buildings rather than the ground floor,
need for those secondary locations are likely to try and turn their delivery that fundamentally changes the way
that are something of a layover. The fleets electric as quickly as possible. buildings are configured. “If your building
big centralised logistics hubs get Logistics facilities will need to have is one of the first that is accessible by
bigger, and there is greater need for access to enough power to charge up air taxis, that could be a huge draw for
last-mile solutions.” large fleets of vehicles. occupiers,” one investor says.
80 Emerging Trends in Real Estate® Europe 2020 Image: Getty Images

Fewer cars in cities “As city centres become increasingly Sustainability goals
car-free, and those cars that are
[present] give out no emissions, an In any event, municipal authorities and
One of the main relationships that
increasing amount of these areas can real estate investors are aligned in their
new transport solutions change is
be given over to public spaces,” one goal of making cities more healthy,
our dependence on cars, which has
architect says. “They become more sustainable and desirable. For investors,
long shaped our cities and buildings.
pleasant places to live and work, so they this commitment ties in with the long-
Major cities are surrounded by suburbs
become more desirable. That makes term trend to make their portfolios more
where the car is the principal mode of
them more valuable.” A global investor sustainable, whether that is trying to
transport. But the expectation among
agrees: “As cities move to prohibit car understand their environmental or social
interviewees for Emerging Trends
use, we are focusing our investment impact. “We have a goal to make our
Europe is that this will change.
around public transport nodes, as we portfolio carbon neutral, and mobility
see those being the areas where value plays a big part in that,” one investor
As urbanisation continues, cities cannot
will increase.” says. “We are no longer buying assets
cope with the number of cars on their
roads and the amount of pollution they that can only be reached by car. There is
The result is a double benefit for cities no point having green buildings if people
create. According to IHS Markit, global
as space usually reserved for cars can have to drive to get there.”
private car sales will peak in the next
be transformed into other more pleasant
decade and start to decline in developed
uses, and due to the existing density, the Investors are also mindful that regulation
economies like Europe. The trend will
cities themselves will be more likely to is likely to drive change here, with
be exacerbated by the increasing use of
get new mobility solutions first. stricter controls on carbon emissions
ride-hailing technology, micro-mobility
solutions and further out, autonomous for owners, and in places such as the
This phenomenon is not ubiquitous Netherlands, regulatory issues with
vehicles.
across European capitals and is likely nitrogen emissions. As there is a lot
to be much more pronounced in large going on at the moment and rules are
“More and more cities are banning
cities. “In medium-sized or smaller changing again, it is no coincidence that
cars from city centres or trying to
cities the reliance on the car is likely to environmental concerns have shot up
reduce cars entering city centres,”
continue, as it is much harder to put in in importance in this year’s Emerging
one global investor points out.
place alternative infrastructure in areas Trends Europe survey just as the
The objectives are clear: reducing
where the population is not as dense,” industry is starting to engage fully with
congestion and improving air quality,
one mobility expert suggests. However, mobility initiatives.
benefiting individuals and cities alike by
car sharing and other mobility solutions
promoting healthier modes of transport,
could help open up areas in these cities. “The real estate industry should be
such as cycling.
linking mobility more closely with
Cities like Vienna and Brussels have sustainability in terms of investment
banned cars from some of their historic decision-making,” another investor adds.
central areas, and in the new districts “At present, ESG standards are not
being developed by the Copenhagen city ESG standards are not generally capturing the importance of a
government there is parity between bike capturing the importance building’s location and connectivity. For
and car lanes. In London, Amsterdam example, a building can be highly rated
and Madrid, city authorities have either
of a building’s location as sustainable, yet be in a place where
instituted or are about to institute central and connectivity. A workers have to go by car.”
zones where only ultra-low-emission building can be highly
vehicles can enter free, with drivers of
other types of vehicle paying a charge.
rated as sustainable, yet
The uptake among city populations be in a place where
of cycling makes it easier for cities to workers have to go by car.
introduce these policies.

Parking by numbers
According to parking garage owner and operator
Q Park, there are 440 million parking spaces
in Europe, against a population of 513 million
people. Half of that is either on-street or open-air
surface car parks, another third relates to private
homes or workplaces, with the rest in specialist
Image: Parklets in Hammersmith, parking garages. With the average parking space
London, UK (Hammersmith & Fulham
Council/Justin Thomas) measuring about 17 square metres, that is about
7,358 square kilometres given over to parking.
That is an area three times the size of Greater
Paris, just for cars to park.

What to do with all Such initiatives can be seen as Australian developer Mirvac has
defensive. But they can be a source of dedicated routes in and out of its
that parking? new revenue. Deliveroo has converted shopping centres for food-delivery app
parking spaces into “dark kitchens”: riders.
facilities from which restaurants can fulfil
If it is accepted that, sooner or later, all
online orders away from their premises. Many interviewees point out that city
cities will become less reliant on the
governments have a huge part to play
private car, the big question already
One investor-developer is looking to in turning inefficient parking space
exercising the minds of many in the
put a series of last-mile delivery hubs into modern, future-facing real estate.
European real estate community is: what
in the car parks in its buildings: the Many still have minimum parking space
do we do with all that parking? In the
space would be rented out to delivery standards for residential, office and
main, they see a huge opportunity to
companies, goods would be delivered retail developments, which mean even
reposition these assets.
there at night and then redistributed if a developer wants to convert parking
during the day by bikes and electric spaces or develop a new building with
“Some landlords are being very forward
vehicles to reduce congestion and fewer spaces, their hands are tied.
thinking and looking to future-proof
pollution. Brazil’s infamously gridlocked Sao Paolo
schemes,” one transport expert says.
has changed from imposing minimum
“For every scheme being built, people
are now asking, do we need a car park?” Beneficial uses parking requirements to maximum
requirements in a bid to reduce
congestion and improve air quality – with
“Where we are building car parking, we Austrian developer Signa has taken
positive results. Zurich has introduced
are trying to make it flexible, so it can be advantage of the pedestrianisation of
similar measures.
easily converted to other uses,” a global the area around one of its Karstadt
investor adds. There are obvious uses: department stores in central Berlin. It
Not everyone accepts the assumption
electric autonomous vehicles will need has built walkways directly from the
that the need for car parking will
to be charged and stored somewhere; underground metro station into the
reduce. As recently as October 2019,
obsolete parking facilities in remote store to make it easier for shoppers to
Dutch pensions group APG bought a
locations are ideal. get there. And because they can no
39 percent stake in European car park
longer drive away with their goods, it has
operator Interparking, which owns and
Many developers are already converting included an underground distribution
manages 949 sites in 416 cities across
existing parking spaces into facilities for hub, so shoppers can have their
nine countries. Parking operators
bikes, as cycling becomes increasingly purchases delivered the same day.
interviewed for this report believe any
popular in cities. But one transport
reduction in on-street parking would
expert warns that to do this right must Not everything has to be motivated by
increase demand for their dedicated
involve more than simply putting up a revenue; quality of life and social impact
parking garages. Overall parking
few cycle racks. “You have to be able to are also increasingly important as it is
demand, they say, would be flat. What
ride your bike into the building without felt these elements indirectly add value.
is almost certain to change, however,
getting off. People will expect good For instance, San Francisco has been
is the location of their garages. City
quality showers and changing rooms, a successful at allowing residents to turn
centre garages can be converted to
towel service, and a bike kitchen where unused parking areas into tiny parks
more valuable uses, and new facilities
you can get repairs done during the called parklets.
are therefore likely to be bought or built
working day.”
outside the centres.
When it comes to new developments, all
Another investor goes further: “In the of these elements could be incorporated
future, developers will need to create from the start – effectively putting
buildings where autonomous vehicles space to more profitable or beneficial
can seamlessly enter a building to use. But with the rise of online services,
drop off their passenger, with digital developers will need to think about
technology allowing the building to know how delivery vehicles and bikes access
which cars should be allowed in.” their properties in much the same way
that previously they worked around the
parking needs of residents, workers
and shoppers.

Micro mobility As with other progressive transport It is still more theory than reality, but
solutions, the impact of micro mobility as long ago as 2014, Savills found
enhances value is likely to be felt first in city centres, that proximity to docking stations
where density is greatest. But it could for London’s shared bike scheme
Inextricably linked to the expected also boost the value of peripheral increased residential values. “We fight
reduction in car use is the rise in locations. Real Capital Analytics’ to have [city bike sharing scheme] bike
micro-mobility forms of transport, in “walkability index” has shown the closer racks placed as close to our buildings
particular bikes and scooters. “People buildings are to amenities, the greater as possible,” one developer says.
always focus on the high-tech solutions, the value. E-scooters can make distant “In one municipality, this is done by
but the low-tech solutions are more locations which are not close to public sponsoring the racks.”
likely to have a big influence,” one transport more accessible by reducing
mobility expert says. the time taken to get there, and thus If shared scooters and bikes do take off
increase their value. “If I’m a business in a big way, it opens up the potential
Amsterdam has long given the bike person I can hop on a scooter and go for areas further away from established
equal status with the car, and this two miles in the time it takes me to walk public transport hubs to become viable
is only likely to be reinforced by five hundred yards, without crumpling for development. And the solution to
the growing popularity of new bike my suit,” one investor says. shared bikes and scooters littering
subscription companies like Swapfiets, the streets? “We would expect a large
which allow users to hire bikes for a amount of on-street parking to be
monthly fee, including maintenance. converted to parking and facilities for
Fast biking lanes are being built for bikes and scooters,” one architect says.
those coming from outside the city on
e-bikes. Other cities across Europe,
such as London and Copenhagen, are
looking to increase cycle infrastructure.
Across the globe, venture capitalists are

investing heavily in electric scooter and
bike-share companies. This is leading
to a fierce debate about their usage:
which is more dangerous, scooters
sharing the road with cars or the
pavement with pedestrians?
From a real estate point of view, micro

mobility has multiple ways in which
it can add to the value of schemes.
“Scooters and bikes are a great amenity
which building owners can provide for
tenants,” one venture capitalist says.
“It increases the accessibility of your
scheme, which increases the value.”
Image: Getty Images

The virtuous circle Achieving target returns will require a widening of the definition of traditional real estate to
include real assets and related service businesses
Just as mobility trends can impact the
way real estate operates, so real estate
can influence changes in mobility. 23% 48% 21% 8%
1%
Some real estate players are Agree Neither/nor Disagree Disagree
investing directly in mobility solutions. strongly Agree strongly
Venture capital firm Fifth Wall is an
investor in bike and scooter rental Use this as "bubble diagram" in Ch 1 - in the final section of the main piece - ie near the crosshead "Mobility matters for real estate
company Lime. Fifth Wall’s investors

include Gecina, Segro, Hines and
CBRE. Indeed, New York’s bike-share
scheme was originally set up, owned (Re)development is the most attractive way to acquire prime assets
Similar positive feedback loops can The same is true when it comes to
and operated by a subsidiary of
be found in other areas. As Emerging promoting healthy transport options.
developer Related Companies.
Trends Europe has highlighted in The more cities provide bike lanes, the
But more common are partnerships
21%rented residential
previous years, 47% 23% safer people feel 7% riding bikes. Building
1%
developers are offering tenants credits owners and developers providing a
between real estate firms, mobility Agree companies if they are Neither/nor Disagree Disagree
with ride-hailing Agree
safe place to store bikes plus shower
companies, public sector bodies strongly strongly
willing to give up their parking spaces. facilities would encourage more people
or infrastructure providers, jointly
Others are offering access Use thisto car-share
as "bubble toconstruction
diagram" in the cycle. Providing places to rack bikes
costs Top Trend
promoting mobility and transportation
schemes. In Dublin, developers have and scooters – so they don’t litter the
solutions. At its best, this can produce a
done this with car-share company streets – and incentivising consumers
virtuous circle where real estate speeds
GoCars, while also allowing residents to use them would persuade authorities
up the adoption of technologies that Prime assets are overpriced
to make use of the city’s bike-sharing that their use should be supported,
are beneficial for the environment and
scheme. The more such facilities are not limited.
society but also improve the value of a
offered, the more likely people are
company’s assets.
18%
to use them, 47%
reducing the number of 23% The emergence 11% of so many different
private vehicles on the road and in turn transport providers has opened up an
A good example is electric vehicles.
reducing the need for parking spots inNeither/nor
Agree Disagree
important opportunity for real estate
“One of the big barriers to adoption strongly Agree
developments. players. They have the scope now to
is the lack of charging stations,” one
embrace
Use as "bubble diagram" in chapter one, mobility
with Construction solutions
costs Top Trend that help
global investor says. “People are
identify and enhance value for new
worried about charging their car, so
Source: Emerging Trends Europe survey 2019 locations while changing the way we
they don’t buy one. The more places
move around the world, and thus the
there are to charge your vehicle, the
way that world is built.
more people will buy these vehicles. We
are putting these stations in shopping
centres and offices to trial it out. We
don’t want to have to do it quickly
and get it wrong when electric cars
are ubiquitous.”

About the survey
“What we are seeing is that a lot of technology applies to
urban infrastructure and the built environment, whether it’s
mobility, connectivity, security, energy efficiency or smart
grids – all of which cuts into real estate in a large way.”
Director, UK private equity firm
86 Emerging Trends in Real Estate® Europe 2020 Image: Berlin, Germany

Europe, a trends and forecast Survey results
publication now in its 17th edition,
is a highly regarded and widely read
report in the real estate industry. 29% 26% 25% 13% 10%
Undertaken jointly by PwC and Urban
Land Institute, the report provides an Real estate Private property Fund/ Institutional/ Publicly listed
outlook on real estate investment and service firm company or investment equity investor property
development trends, real estate finance developer manager company or
and capital markets, cities, property REIT
sectors and other real estate issues
5% 5% 4% 5%
throughout Europe.
Homebuilder or Real estate Other
Emerging Trends in Europe 2020 residential Bank, lender, operator
developer or securitised
reflects the views of 905 individuals who
lender
completed surveys or were interviewed
as a part of the research for this report.
The views expressed, including all Source: Emerging Trends Europe survey 2020
comments appearing in quotes, are
from these surveys and interviews and
do not express the opinions of either Survey responses by geographic scope of firm
PwC or ULI. The interviewees and
survey participants represent a wide
range of industry experts, including 2%
investors, fund managers, developers, 47% 27% 24%
property companies, lenders, brokers,
advisers and consultants. A list of
the interviewees in this year’s study
appears on the following pages. To Focused primarily on Global focus Pan-European Other
one country focus
all who helped, ULI and PwC extend
sincere thanks for sharing valuable
time and expertise. Without their
involvement, this report would not have
been possible.
Survey responses by geographic scope of firm (%)

Finland 2
1 Russia
Denmark 1
Ireland 3
UK
17 Netherlands Czech
Republic 1 Poland
4
18
1
Romania 1
Belgium 8 Germany 2 Austria

1 Luxembourg
France 4
9 Switzerland
3 Greece 4 Turkey
5 Italy
Spain 12
Portugal 3
1 Cyprus

About this survey
Interviewees
8G Capital Partners Allianz Real Estate Aspelin Ramm

Tassos Kotzanastassis Alexander Gebauer Gunnar Bøyum
Grigor Hadjiev
a.s.r. real estate Kari Pitkin Atrium European Real Estate
Rodney Zimmerman Donato Saponara Karol Bartos
François Trausch Anna Dafna
Aareal
Buket Hayretci alstria office AURA REE
Alexander Dexne George Tomaras
Aberdeen Standard Investments
Steen Foldberg AM Avant Capital Partners
David Paine Ronald Huikeshoven Lorenz Merk
AB Sagax Ampega Real Estate Avantor

Jaakko Vehanen Markus Linden Øystein Thorup
AECOM Amstar Avara

Chris Choa Christopher Zeuner Harri Retkin
Amundi Real Estate
AEW Giovanni Di Corato Aviva Investors
Raphaël Brault Mathias Huebner
Patrick Meutermans Amvest
Loes Driessen AXA IM – Real Assets
AF Gruppen Dr. Rainer Suter
Ida Aall Gram Annexum
Huib Boissevain Bain Capital Credit
AFIAA Andrew Pain
Ingo Bofinger Antirion David Cullen
Ofer Arbib
AGRE Baltisse
Amaury de Crombrugghe APF International Alex Dewitte
Wiggert Karreman
Akelius Bank Austria Real Invest
Thomas Bang-Pedersen APG Peter Czapek
Robert-Jan Foortse
Alcampo Patrick Kanters Barings Real Estate Advisers
Javier Marín Robert Schneider
Apollo Global Management BaseCamp Student
Alides Roger Orf Armon Bar-Tur
Rikkert Leeman
Aquileia Capital Services Befimmo
Aliseda Alfredo Balzotti Benoit De Blieck
Enrique Used
Ardian Belfius
Bernd Haggenmüller Annemie Baeke

Benson Elliot Brook Lane Capital Cerved Property Services
Joseph De Leo Harris Papacharalampous Dimitris Andritsos
Marc Mogull
Brunswick Real Estate Cobblestone
Beos Hanna Rauhala Rasmus Juul-Nyholm
Stephan Bone-Winkel
Budimex Nieruchomości Colonial
Bergson Capital Henryk Urbanski Carmina Ganyet Cirera
Fabian Godbersen Pere Viñolas Serra
Burlington Real Estate
Berlin Hyp John Bruder Colony Capital
Gero Bergman Alain Chetrit
BVK
Blackstone Herr Rainer Komenda Corestate Capital
James Seppala Douglas Edwards
By & Havn
BMO Real Estate Partners Anne Skovbro Covivio
Richard Kirby Alexei Dal Pastro
Angus Henderson CA Immo
Andreas Quint Creditricole
BNP Paribas Real Estate Guillermo Bergareche
Francesco Benvenuti CapMan
Nathalie Charles Mika Matikainen Cromwell
Andy Martin Per Tängerstad Karol Pilniewicz
Bonnier Fastigheter Castello Cushman & Wakefield

Tomas Hermansson Giampiero Schiavo Eric van Leuven
Borio Mangiarotti Catella Asset Management DeA Capital

Edoardo De Albertis Timo Nurminen Emanuele Dubini
Bouwinvest CBRE Deka

Robert Koot Marie Hunt Jack Schulte
Sami Kiehelä
Bouygues Immobilier Delft Hyperloop
Olivier Durix CBRE Global Investors Rieneke van Oort
Sophie van Oosterom
Bride Street Capital Jeremy Plummer Deutsche Hypo
Paul Kennedy Antonio Roncero Alexander Firsching
Jarosław Sypniewski
Brioschi Sviluppo Immobiliare Diös
Matteo Cabassi CDP Investimenti Knut Rost
Paola Delmonte
British Land
Simon Carter

About this survey
Interviewees
Dromeus Capital Group Goodbody Immobel

Nick Balanis Colm Lauder Marnix Galle
Inmobiliaria Espacio
DWS Alternatives Great Portland Estates Alberto Muñoz Peñin
Jeffrey King Nick Sanderson
Innovestor
Eastdil Secured Green REIT Tomi Asanti
Michael Cochran Pat Gunne
Inowai
Eiendomssoar GreenOak Vincent Bechet
Jon Rasmus Aurdal Jim Blakemore
Griffin Real Estate Invesco
eQ Maciej Tuszynski Alejandro Monge
Tero Estovirta
GVA Redilco Invesco Asset Management
Fabege Giuseppe Amitrano Anna Duchnowska
Åsa Bergström Alejandro Monge
Habitat Inmobiliaria Doris Pittlinger
Ferd José Carlos Saz Alexander Taft
Carl Brynjulfsen
Hammerson I-RES REIT
Fidentia Jean-Philippe Mouton Margaret Sweeney
Louis de Halleux
Geoffroy Mertens HB Reavis Ivanhoé Cambridge
Marian Herman Karim Habra
Fifth Wall Peter Pecnik
Roleof Opperman J.P. Morgan
Heitman Chester Barnes
Fredensborg Bolig Brian Klinksiek Peter Reilly
Magnus Aune Hvam
Hibernia REIT JLL
Freo Kevin Nowlan Jan Eckert
Erwan le Berre Pieter Hendrikse
H.I.G Capital Chris Ireland
GalCap Europe Jaime Bergel
Manfred Wiltschnigg KBC Real Estate
Hines Kim Creten
Garanti BBVA Patricia Bandeira Vieira
Murat Atay Lars Huber Keva
Brian Moran Petri Suutarinen
GMP Property Lee Timmins
Xavier Barrondo Klépierre
Hoegh Eiendom Cyrille Deslandes
Goldman Sachs Eirik Thrygg Marco De Vincenzi
Jim Garman
IGD SIIQ Knight Frank
Claudio Albertini Alistair Elliott
Kryalos
Ilmarinen Paolo Massimiliano Bottelli
Kenneth Nyman

La Foncière Metaprop Octopus Healthcare
Arnaud de Jamblinne Elie Finegold Kevin Beirne
LaGare Montano Asset Management OP Real Estate Asset Management

Francesco Paternostro Ramin Rabeian Pihlström Pami
Sebastian Schöberl
LaSalle Investment Management Orilina
David Ironside Morgan Stanley Marios Apostolinas
Uwe Rempis Andrey Kolokolnikov
Jon Zehner Brian Niles Orion Capital Managers
Silvia Rovere Van J. Stults
Leasinvest
Michel van Geyte Mrec Orox Asset Management
Tomi Grönlund Pierre Jacquot
Legal & General Affordable Homes Ville Mannila
Ben Denton Oslo Areal
Mutua Inmobilaria Mona Ingebrigtsen
Lendlease Emilio Colomina
Marco Fok Oxford Properties
NCP Paul Brundage
M&G Real Estate Lee Holland
John Barakat Panattoni Europe
Tony Brown Newsec Robert Dobrzycki
Max Barclay
m3 Real Estate Patrimonia Polska
Renaud Vincendon NIAM Yann Guen
Antti Muilu
Maglev PATRIZIA
Phill Davies NN Investment Partners Sheelam Chadha
Lennart van Mierlo Marcus Cieleback
Malling & Co Peter Helfrich
Anders Berggren Nomisma Anne Kavanagh
Haakon Ødegaard Luca Dondi dall’Orologio Philipp Schaper
MDSR Investments Nordea pbb Deutsche Pfandbriefbank

Annalaura Benedetti Timo Nyman Charles Balch
MEAG Norwegian Property PGGM Investments

Dr Stefan Krausch Bent Oustad Guido Verhoef
Mengus NREP PGIM Real Estate

Henric From Jani Nokkala Dr. Thomas Kallenbrunnen
Meridia Capital Numeria Pictect

Juan Barba Gian Luigi Rocco Laurent Gabert
Merlin Properties Nuveen PLP Architecture

Ismael Clemente Mike Sales Lars Hesselgren
Luis Lázaro Jack Sibley

About this survey
Interviewees
Polish Properties Schroders Swiss Life Asset Managers

Chris Grzesik Roger Hennig Konstantin Hähndel
Ricarda von der Heyde
Prelios Schuman, Baard Renato Piffaretti
Riccardo Serrini Baard Schuman
Swiss Prime Site
Primevest Capital Partners SEGRO Jean Megow
Bart Pierik Cyril Derkenne René Zahnd
Ruud Roosen Marco Simonetti
Swiss Re
Primonial REIM Selvaag Eiendom Timour Boudkeev
Laetitia Treves Cecilie Martinsen
TAG Immobilien
Provinzial NordWest Asset Serenissima Martin Thiel
Management Tomaso Bersani
Matthias Huesmann Titania
Shaftesbury Anders Söderlund
PSP Swiss Properties Brian Bickle
Giacomo Balzerini Torre
SIDIEF Michele Stella
Quabit Inmobiliaria Carola Giuseppetti
Javier Prieto Ruiz Transport for London
Sierra Balmain Iain Macbeth
QuadReal James Turner
Jay Kwan Trevian
SIGNA Stefan Söderholm
Realstone Jürgen Fenk Maria Söderman
Jonathan Martin Jörg Krane
David Nadge Tribeca Capital Partners
Redevco Tobias Sauerbier Philip Walravens
Kristof Restiau
Skanska Tristan Capital Partners
Refondo Holding Arkadiusz Rudzki Andrea Amadesi
Martin Bruns Matthew Lunt
SMR Strategy Simon Martin
Risanamento Dr Levent Sümer
Davide Albertini Petroni U+I
Solum Property Solutions Matthew Weiner
RISE Panos Charalampopoulos
Lei Chen UBM Development
Sonae Sierra Thomas G. Winkler
SAREB Alexandre Fernandes
Jaime Echegoyen UBS
Stoneshield Eoin Bastible
Schage Felipe Morenes Marco Doglio
Egil Svoren Nicola Franceschini
Stoneweg Gunnar Herm
Jaume Sabater Reto Ketterer
Jesús Silva

Unibail Rodamco Westfield Vasce
Jaap Tonckens Fredrik Linderborg
Union Investment Victoria Asset Management

Martin Brühl Eduardo Boveda
Unite Group Warburg-HIH Invest Real Estate

Joe Lister Reinoud Plantenga
UNStudio Wereldhave
Ben van Berkel Casper Deforche
Vailog White Octopus

Eric Veron Ingo Kurcz
Value One YIT Slovakia

Dr Andreas Köttl Milan Murcko
Värde Partners Zurich Insurance

Alessandra Bernini Olafur Margeirsson
Cornel Widmer
Varma
Ilkka Tomperi
Vasakronan
Anders Ahlberg
Johanna Skogestig

Sponsoring Organisations, Editors and Authors
PwC’s real estate practice assists real estate investment Bruno Lunghi
advisers, real estate investment trusts, public and private real PwC Real Estate Leader, France
estate investors, corporations, and real estate management
funds in developing real estate strategies; evaluating Susanne Eickermann-Riepe
acquisitions and dispositions; and appraising and valuing PwC Real Estate Leader, Germany
real estate. Its global network of dedicated real estate
professionals enables it to assemble for its clients the most Vassilios Vizas
qualified and appropriate team of specialists in the areas PwC Real Estate Leader, Greece
of capital markets, systems analysis and implementation,
research, accounting, and tax. Joanne Kelly
PwC Real Estate Leader, Ireland
Craig Hughes
PwC Global Real Estate Leader Lia Turri
PwC Real Estate Leader, Italy
Angus Johnston
PwC EMEA & UK Real Estate Leader Amaury Evrard
PwC Real Estate Leader, Luxembourg
Uwe Stoschek
PwC Global Real Estate Tax Leader Serge de Lange & Brian Adams
PwC Real Estate Leaders, Netherlands
Gareth Lewis
PwC ETRE Global and EMEA Leader Bjorn E Johannessen
PwC Real Estate Leader, Norway
Mark Mesiti
PwC Senior Business Manager Real Estate (UK) Kinga Barchon
PwC Real Estate Leader, Poland
Participating EMEA PwC Real Estate Territory Leaders
Jorge Figueiredo
Peter Fischer PwC Real Estate Leader, Portugal
PwC Real Estate Leader, Austria
Oleg Malyshev
Grégory Jurion PwC Real Estate Leader, Russia
PwC Real Estate Leader, Belgium
Rafael Bou Cobo
Richard Jones PwC Real Estate Leader, Spain
PwC Real Estate Leader, Czech Republic
Arne Engvall
Jesper Wiinholt PwC Real Estate Leader, Sweden
PwC Real Estate Leader, Denmark
Alexander Šrank
Jeroen Bus PwC Real Estate Leader, Slovakia
PwC Real Estate Leader, Finland
Marie Seiler
PwC Real Estate Leader, Switzerland
Ersun Bayraktaroglu
PwC Real Estate Leader, Turkey
www.pwc.com
The Urban Land Institute is a global, member-driven Editors and authors
organisation comprising more than 45,000 real estate and
urban development professionals dedicated to advancing Alex Catalano, Co-Editor
the Institute’s mission of providing leadership in the Doug Morrison, Co-Editor and Author
responsible use of land and in creating and sustaining thriving Mike Phillips, Author
communities worldwide. Jane Roberts, Author
Stuart Watson, Author
ULI’s interdisciplinary membership represents all aspects of
the industry, including developers, property owners, investors, PwC Research
architects, urban planners, public officials, real estate brokers,
appraisers, attorneys, engineers, financiers, and academics. Honor Mallon, Research Leader
Established in 1936, the Institute has a presence in the Gillian Kane, Principal Insight Consultant
Americas, Europe, and Asia Pacific regions, with members in Paul Irwin, Insight Consultant
81 countries. Jie Jiang, Insight Associate
The extraordinary impact that ULI makes on land use decision- Editorial Oversight Committee
making is based on its members sharing expertise on a variety
of factors affecting the built environment, including urbanisation, Patricia Bandeira Vieira, Hines
demographic and population changes, new economic drivers, Gero Bergmann, Berlin Hyp
technology advancements, and environmental concerns. Lisette van Doorn, ULI Europe
Beatrice Guedj, Swiss Life Asset Managers
ULI has been active in Europe since the early 1990s, and today Wilson Lee, Cale Street Partners
has almost 3,800 members across Europe with 14 national Gareth Lewis, PwC UK
councils. The Institute has a particularly strong presence in Giancarlo Scotti, GCS & Partners
the major European real estate markets of the UK, Germany,
Belgium, France, and the Netherlands, but is also active in
developing markets such as Poland and Spain.
W. Edward Walter
Global Chief Executive Officer
Urban Land Institute
Lisette van Doorn

Chief Executive Officer
Urban Land Institute Europe
Anita Kramer
Vice President
ULI Center for Capital Markets and Real Estate
Urban Land Institute
Andrea Carpenter
Consultant
Urban Land Institute Europe
www.europe.uli.org
More information is available at uli.org. Follow ULI on Twitter,

Facebook, LinkedIn, and Instagram.

Emerging Trends in Real Estate® is a registered trademark of PricewaterhouseCoopers LLP (US firm) and is registered in the
United States and European Union.
© November 2019 by the Urban Land Institute and PwC. All rights reserved. PwC refers to the PwC network and/or one or
more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. No
part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying
and recording, or by any information storage and retrieval system, without written permission of the publisher.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional
advice. You should not act upon the information contained in this publication without obtaining specific professional advice.
No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in
this publication, and to the extent permitted by law, the Urban Land Institute and PwC do not accept or assume any liability,
responsibility, or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the
information contained in this publication or for any decision based on it.
Recommended bibliographic listing: PwC and the Urban Land Institute. Emerging Trends in Real Estate® Europe 2020.
London: PwC and the Urban Land Institute, 2019.
Climate of change
Europe 2020
What are the best bets for investment and development across Europe in 2020? Based on personal interviews with and
surveys from 905 of the most influential leaders in the real estate industry, this forecast will give you the heads-up on where
to invest, what to develop, which markets and sectors offer the best prospects, and trends in capital flows that will affect real
estate. A joint undertaking of PwC and the Urban Land Institute, this 17th edition of Emerging Trends Europe is the forecast
you can count on for no-nonsense, expert insight.
Highlights
• Tells you what to expect and where the best opportunities are.
• Elaborates on trends in the capital markets, including sources and flows of equity and debt capital.
• Reports on how the economy and concerns about credit issues are affecting real estate.
• Discusses which European cities and property sectors offer the most and least potential.
• Describes the impact of social and political trends on real estate.
www.pwc.com/emerging-trends-real-estate/europe-2020
www.uli.org
#ETRE20

Emerging Trends in Real Estate (2020) - PWC

Uploaded by

Copyright:

Available Formats

Emerging Trends in Real Estate (2020) - PWC

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Emerging Trends in Real Estate (2020) - PWC

Uploaded by

Copyright:

Available Formats

Emerging Trends in Real Estate®

Front cover image:

Image: Milan, Italy

22 Real estate capital markets

74 Getting smart about mobility

We are doing more of what we think of as low

Emerging Trends in Real Estate® Europe 2020 1

There are consequently question marks

The shift in monetary policy has led to

With interest rates set to stay lower

Yet there is little evidence of complacency

Image Apple Store, Piazza Liberty, Milan,

2 Emerging Trends in Real Estate® Europe 2020

Emerging Trends in Real Estate® Europe 2020 3

Director, global investment manager

Image: Pedestrian walkway to Granary

Figure 1-1 Business prospects in 2020

Source: Emerging Trends Europe survey 2020

Emerging Trends in Real Estate® Europe 2020 5

The possibility of a recession or

“There are plenty of huge question Social equity/inequality

Nor has the monetary policy shift

6 Emerging Trends in Real Estate® Europe 2020

Emerging Trends in Real Estate® Europe 2020 7

8 Emerging Trends in Real Estate® Europe 2020

Emerging Trends in Real Estate® Europe 2020 9

Figure 1-5 European business environment in next 3–5 years

Improve Stay the same Get worse

Source: Emerging Trends Europe survey 2020

10 Emerging Trends in Real Estate® Europe 2020

For all the political and economic

Source: Emerging Trends Europe survey 2020

relative to bonds and equities. As one 4

real estate provides, given a negative 0

Source: CBRE, Datastream from Reﬁnitiv, European Central Bank

Figure 1-8 UK property yields and interest rates, 2010–2019

Source: CBRE, Datastream from Reﬁnitiv, European Central Bank

Emerging Trends in Real Estate® Europe 2020 11

European real estate has been “brought As oneFigure

A net seller open-end funds and high-net-worth Significantly lower 20%+

12 Emerging Trends in Real Estate® Europe 2020

Figure 1-10 Figure 1-11 Figure 1-12

32% 21% 38%

Source: Emerging Trends Europe survey 2020

Emerging Trends in Real Estate® Europe 2020 13

And when it comes to development, For others, alternative real estate

Emerging Trends in Real Estate® Europe 2020 15

16 Emerging Trends in Real Estate® Europe 2020

Source: Emerging Trends Europe survey 2020

Figure 1-15 Climate change impact on portfolio

No material impact 26%

More capital expenditure 22%

Higher operational expenses 20%

Faster obsolesence 18%

Higher insurance premiums/non-insurabiility 6%

Increased number of sales 0%

Source: Emerging Trends Europe survey 2020

Emerging Trends in Real Estate® Europe 2020 17

Image: Dortheavej Residence affordable housing