Lack of institutional grade stock and keen competition in core markets will drive renewed investment and development activity in peripheral markets and second tier European cities EMEAwide, but especially in the German ‘Alternative Twenty’, the Polish ‘Big Six’, Spain and Ireland. Pension funds and insurers are set to take on a much greater volume of real estate loans and debt placements as bank balance sheets continue to shrink.
European Economy to Emerge from Recession
The European economy will emerge from recession, driven by stronger domestic demand and capital investment in Germany,
household spending and financial services recovery in the UK and further improvement in the Spanish and Italian economies.
There will be stronger inward investment into Europe as the Eurozone sovereign debt crisis retreats further and controversial
EU regulatory reforms are scrapped due to national challenges to ‘treaty overreach,’ resulting in greater political certainty.
UK Economy Will Strengthen Through Further Government Stimulus
UK consumer confidence and economic recovery will strengthen in 2014 with real GDP likely to rise by 2.5% as the government continues to stimulate the economy through policies aimed at supporting house prices and increasing household spending in the run-up to the 2015 election. Increased business confidence will lead to rental growth UK-wide as occupier markets strengthen and business expansion gains traction. Government macro-prudential initiatives may delay any interest rate rise beyond 2015.
“ UK consumer confidence and economic recovery will strengthen in 2014 with real GDP likely to rise by 2.5% as the government continues to stimulate the economy.”
UK Regional Markets and Secondary Assets Will Be Back in Play
Property investment transactions will grow beyond the £40bn recorded by year-end 2013, but will fall short of the 2006 peak level of £58bn. In the absence of quality supply and with keen competition from international cash buyers, domestic investors will look beyond core markets and assets to regional and secondary assets requiring capital expenditure and refurbishment into institutional grade product. This demand will result in lower yields in London and moderate yield compression across secondary asset classes.
Source: 25 Predictions for 2014 | Q1 2014 | Global | Colliers International