London Still Tops Popularity Polls for European Property Investors
According to the latest LaSalle Investment Management's European Regional Growth Index (E-REGI), which ranks Europe's top 100 cities, London has once again taken first position in the ranking.
The report highlights London's resilience combined with its deep investment market, justifying the city as a target for a wide range of investment strategies. Other UK cities increasingly coming to the fore include Manchester, ranked 17th and Bristol at 25th position, both having climbed three spots in the European ranking, while Birmingham is up two places at 37.
"Having published this index for 16 years, we now have an unrivalled understanding of the different economic patterns in Europe's leading cities," said Mahdi Mokrane, LaSalle Investment Management's head of research and strategy for Europe.
"The index not only determines which real estate markets are likely to out or underperform in the medium term, but combined with our on the ground expertise, we also use the index as a strategic framework to match cities with the most relevant investment styles," he explained.
Paris takes second place once again according to the survey and the top two cities are Europe's most consistent performers, although balanced scores and consistent performance over time are not limited to the top of the ranking. Munich, Frankfurt, Hamburg, Stuttgart and Amsterdam are also suited for value-add or opportunistic strategies, the report states. Düsseldorf, Mannheim-Karlsruhe, Cologne-Bonn, Rotterdam-The Hague, Utrecht, Edinburgh and Leeds are also included in the group but the report says core investment in prime markets would be more suited given their smaller market size.
Emerging markets that are receiving increased attention from real estate investors seeking enhanced returns are found in Turkey the report states, with Istanbul scoring highest due to strong growth performance and outlook and the cities of Izmir and Ankara as solid contenders. The cities of Warsaw and Prague continue to benefit from balanced economies and progressive policies, leading to increased growth and investment activity in the Polish and Czech Republic capitals.
Meanwhile in London, there seems to be no let-up in foreign buyer interest in the city's real estate and there are still plenty of entrants in the market wanting to buy in the capital. Foreign investors are particularly dominant at the top end of the market. Of the 111 deals worth £150m in the past three years, 84% involved foreign buyers, according to international estate agents Cushman & Wakefield.
Total investment volumes in the central London market hit a record £24.6bn last year, Cushman & Wakefield's data shows, and the agent predicts that this year could exceed that figure. The autumn deal-making season is usually the busiest, as investors seek to empty their bank accounts before the year-end and experienced advisers expect the coming months to see a particularly large number of transactions.
Stephen Down, head of central London and international sales at estate agency Savills, says there will be a "fairly substantial uptick in stock coming on to the market".
"The temptation is to think that this means they are calling the market, but that's not the case," he adds. "It is often private equity companies looking to take profits and return them to investors".
The extended global downturn after the financial crisis meant that London's commercial property market took a long time to recover, Mr Down says, and some fund managers that brought early in the cycle are reaching the end of their fund's life and need to cash-in.
It seems that those leaving through the revolving door of London's property market are still bumping into newcomers heading in the other direction. Despite prices and yields being back at pre-crisis levels, plenty of investors are still piling in.
The biggest buyers in the city in the year to date have been Canadian and US investors, according to Cushman data, investing £6.5bn between them so far this year. They are "the bedrock of the market", Mr Down says. "The market in the US has recovered and there is limited stock to be bought, so as a result that money is flowing over here".