London retains its crown as investors’ top European city

London has held on to its position as the most attractive city in Europe for real estate investment despite concerns over Brexit, a major investor survey has found.

Some 17% of the 501 respondents to CBRE’s annual EMEA investor intentions survey cited the UK capital as the most attractive city followed by Berlin (15.8%), which climbed two places year on year. It is the sixth successive year that London has topped the table.

“Although there is short-term disruption in some areas of the market due to Brexit, London is undoubtedly still perceived as a global safe haven from a real estate point of view,” Nick Axford, CBRE’s head of global research, told Property Week.

Despite London’s poll position, the UK narrowly lost out to Germany for the second year in a row when investors were asked about their preferred country to invest in. A total of 22% said Germany was most attractive, compared with 20% who opted for the UK.

“The German economy is seen as being strong amid the uncertainty around the EU,” said Axford, adding that investors were increasingly targeting the Berlin market.

“From an economic point of view, it is doing very well and it has got a strong tech presence.”

Nordic lights

This year’s survey also found that the Nordics were gaining favour among investors. In the city ranking, Oslo and Stockholm entered the top 10 for the first time, taking seventh and ninth positions respectively.

The region has already attracted growing levels of investment. CBRE said that investment volume in the Nordics in 2016 was 66% above the 10-year average, with a particularly strong performance for Denmark, Finland and Sweden.

On a sector level, the survey highlighted growing investor interest in industrial, with 25.9% stating it was their preferred sector, up from 15% last year. Industrial won favour at the expense of retail property, which was preferred by 16.4% of those surveyed: a significant fall from 27% in 2016.

“There has been a bit of a decline in retail because of the potential challenges around ecommerce,” said Axford. “Meanwhile, logistics is a really hot sector.”

Asked about their biggest concerns, 24% of investors cited faster-than-expected increases in interest rates. This was closely followed by the prospect of a global economic shock affecting investor demand (21%).

However, these fears have not dissuaded investors from looking to add to their portfolios. The survey found 85% of investors intended to spend at least as much in 2017 as in 2016 and 41% expected to spend more.

They are also willing to take on more risk - 41% said they favoured opportunistic or value-added opportunities compared with 38% last year, while those favouring prime dropped from 41% to 32%.

For the first time, CBRE also asked investors about the obstacles they faced when carrying out real estate investments.

Aggressive pricing was most commonly cited (by 38% of respondents), followed by availability of assets (35%) and competition from other investors (16%).

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