London ranks fifth for real estate investment
Monday, 02 Feb 2009 12:12
London ranks fifth in survey
London has climbed ten places to rank fifth in a study into the European real estate market.
The capital was ranked fifth most attractive European real estate market for investment prospects, according to the report by the Urban Land Institute (ULI) and PricewaterhouseCoopers LLP.
The survey, Emerging Trends in Real Estate Europe 2009, was based on nearly 500 surveys and interviews from the industry’s leading authorities, and found investment opportunities could grow in London due to falling prices. The survey also placed Munich as the lead real estate investment market in Europe.
However, development prospects remained poor, where London ranked 23rd out of 27 markets in the study, and capital for real estate continued to be in short supply in both equity and debt markets. The majority of buy, hold and sell recommendations in London were focused on holding properties, with buyers showing more interest in office space and hotels in 2009.
The report also reveals the current real estate capital markets crisis could turn into an occupier crisis as Europe slides deeper into recession. Economic growth has continued to decline across Europe in 2008 and this trend will follow into 2009.
John Forbes, real estate leader in Europe, Middle East and Africa, PricewaterhouseCoopers, said: “This is going to be a tough year for many investors. For those who bought at the top of the market it could be a struggle for survival, particularly if banks become more aggressive in dealing with covenant breaches.
“On the other hand for those with equity to invest, there will be opportunities as the banks start to take action. Although new debt will remain in very short supply, banks may have little alternative to remaining as lenders during the restructuring of defaulting borrowers.”
Investment and development prospects fell for all of the cities ranked in the report, with overall investment prospects dropping from a rating of 5.6 (modestly good) in 2008 to 4.7 (fair) in 2009. Development prospects fell even further, from 5.6 to 4.3 (modestly poor).
The respondents also said it was virtually impossible to get new debt and it will continue to be tough to obtain in 2009. Buyers are instead looking to alternative strategies to keep them in a deal, such as looking for seller financing or talking to the existing lender.