Europe’s real estate industry expects to be busier and more profitable in 2015. This optimism is clear, despite weak fundamentals and economic conditions as well as an undercurrent of concern about the geopolitical situation in parts of the world.
The confidence comes from the availability of capital. Real estate is awash with equity. Most of Emerging Trends Europe’s survey respondents and interviewees anticipate an increase in both prime and secondary values as a result of greater liquidity and the need to deploy capital in this asset class.
In many of Europe’s main markets, growth in values has far exceeded any rise in occupier activity. Across the Eurozone, in particular, rental growth remains elusive. This disconnect between capital flows and fragile occupier demand is expected to be, once again, a feature of the markets in 2015.
Nearly two thirds of those surveyed by Emerging Trends Europe believe that core property is overpriced in almost all markets. In this respect, the major influences are the equity-rich sovereign wealth funds and pension funds and insurers from Asia, which have helped drive up the price of core assets in “gateway” cities such as London, Paris, Milan and Berlin. These players are expected to play an even bigger role in European markets in 2015. Private equity firms from North America will also remain a force.