Prospects improving for secondary real estate - CBRE

A gradual recovery in economic performance and business confidence this year will set European real estate up for a stronger recovery in 2014, says realtor CBRE. Prospects are improving for secondary assets and locations this year. Poland should remain strong.

Pan-European property markets faced a difficult economic environment in 2012, with heightened fears of a euro break up in the first half and output flat or falling by the year end. But 2013 has started more positively, with the threat of euro disintegration receding, together with encouraging news from China and the US, underpinning some signs of improvement.

Occupier demand is likely to remain relatively static over 2013, with rental growth most likely confined to a limited number of prime retail and office locations where demand exceeds supply. While demand and rents for industrial space are expected to be broadly flat, new requirements to support multi-channel retail strategies are a potential bright spot. Both occupation and investment will continue to show a marked north/south divide however, with for prime assets in core locations in the north expected hold stable or even rises in price.

"The heightened polarisation between prime and secondary property was a major theme of 2012 and a key question for 2013 is whether this will ease," CBRE said in a report. "A greater appetite for property risk would improve this situation but the availability of new debt for secondary is unlikely to improve much, if at all, in the coming year, meaning the outlook for these assets hinges on the economic fortunes of the region. Nevertheless, improved prospects for better quality secondary assets in stronger markets, which began to attract more interest in late 2012, look set to continue in 2013."

in 2012, Poland, with a continuously positive GDP dynamic and substantial infrastructure investment, was among the strongest performers, along with Germany and Sweden. CBRE Poland MD Colin Waddell commented: "Improving sentiment and better fiscal stability within the Eurozone is having a quiet but positive knock-on effect in Poland, a country that in itself is one of the brighter spots on Europe’s economic map. It may not be overly visible in 2013 but we anticipate economic confidence to steadily build as we draw closer to 2014 and beyond. The current healthy levels of occupier activity in the industrial and office sectors are likely to remain and consequently investor interest in Poland will continue."

While office take-up across Europe fell 7% in 2012, in Poland it rose by 9%, due to activity both in the capital as well as in regional agglomerations, mostly Kraków, Wrocław and the Tricity. This largely results from global and European corporate behaviour heavily focused on cost management, with companies tending to consolidate operational portfolios and looking to expand operational networks into emerging markets, including Poland. pie

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