The market for real estate portfolios in Europe
ResearchThe market for real estate portfolios in Europe will stabilise at a high level over the coming years. Numerous factors are favourably impacting supply and demand and will continue to promote extensive investment. This is the result of the "Sireo Research 2007 – Portfolio transactions in Europe" report, which is the result of a collaboration of the Centre for European Economic Research and Sireo Research.
The survey was based on Sireo's research database, where more than 1300 portfolio transactions in 25 European countries are registered. To date, no other survey has taken such an in-depth look at the market for portfolio transactions, which has been growing since 1997, especially in Great Britain and Germany, and since 2001 in the rest of Europe. A Top 100 list containing details of purchasers, vendors, type of utilisation and purchasing price, among others, provides a detailed overview of the largest portfolio transactions in Europe. This ranking of the largest deals in Europe is topped by a transaction involving a German portfolio. The sale of the residential property company Viterra for seven billion euros in 2005 is the largest portfolio ever traded in Europe. In addition to classic office, retail or residential portfolios, a wide range of package transactions - such as a pub package in Great Britain - are featured, which demonstrate that demand is high and specialisation is progressing.
Germany offers the largest market potential
According to the report, the continuing high levels of availability of commercial real estate are a material factor influencing the ongoing momentum of the market. Industry experts estimate that real estate assets valued at some six billion euros exist across Europe. Of these, some two-thirds are seen as "investible". About two thousand billion euros are nowadays invested in the portfolios of institutional investors, while another two thousand billion are potentially available in the marketplace as "genuine" new supply from owners who have held their real estate for a long time. With the largest real estate holdings of all European countries, Germany, in particular, offers considerable potential. In terms of volume and GDP, Sweden is currently witnessing the highest levels of transaction activity.
Opportunistic investors triggered the boom
Over the period analysed - from 1997 up until the third quarter 2006 - the report registered the largest number of sales and highest volumes in Germany and Great Britain. In Europe as a whole, portfolio transactions focused on commercial real estate. At more than 50%, Germany was the only country where residential portfolios played a significant role. Although numerous international investors are active on the European markets, and cross-border investments are becoming increasingly commonplace, the structures of the portfolios still remain national or regional. Only four percent of the transactions registered by Sireo involved pan-European real estate portfolios. Opportunistic investors and their demand for real estate product exerted a major impact on the market and its momentum, triggering the dramatic increase since 2004. Nowadays, however, ever more "core" investors are operating in the market for portfolio transactions.
Moderate rise in interest rates is not dampening demand
From a purchasing perspective, a range of structural factors favour a consistently high volume of portfolio transactions, according to the report. Among other things, real estate has now become established as an independent asset class. The sector is becoming ever more closely linked to the capital markets, which are witnessing a growing need for investment products and providing new means of financing. Nevertheless, risk is inherent in any market: a considerable increase in interest rates could well exert a negative influence, according to Sireo Research. There is, however, no sign to date that recent interest rate increases have had any impact on transaction behaviour.
Empirical analysis of motives and countries
In addition to a comprehensive overview of the European market and a look ahead to further developments, the report also analyses the motives of purchasers and vendors, financing tools, exit strategies, and economic and real estate market parameters. Markets such as Germany, Great Britain, France, Sweden, Italy and Central Europe are surveyed and analysed individually.
"Sireo Research 2007 – Portfolio transactions in Europe" is available in German or English at a price of 499 euros at www.sireo.com.
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