London was cited as the most attractive city for European real estate investment in 2022 for the second consecutive year, according to CBRE’s 2022 EMEA Investor Intentions Survey, released today. Paris and Amsterdam completed the top three, followed by Berlin and Frankfurt, reflecting continued positive investor sentiment toward German cities.
With three cities appearing in the list of investors’ top ten preferred cities (Berlin, Frankfurt and Munich), Germany was also ranked highest in terms of expected performance, with just over a quarter of cross-border investors expecting the country to perform best in 2022. This follows a record-breaking performance in 2021, when investment volumes in Germany increased 39%. The UK was ranked second overall, up from fifth place in 2021, with just under 25% of investors expecting the country to perform the best in the year ahead, signaling a return of investor confidence.
According to the report, 60% of investors expect to buy more real estate in 2022 than they did in 2021. This is particularly notable as 2021 investment volumes in Europe closed at an all-time high, providing another indication of improving investor sentiment across European markets.
Unsurprisingly, the survey results also demonstrated continued investor focus on the adoption of ESG strategies. In 2022, 70% indicated that they have already implemented ESG criteria in their investment practices, a four percentage-point increase from last year. Asset enhancement was identified by 80% of investors as the primary way of meeting ESG criteria.
Despite the widespread adoption of hybrid working as a result of Covid-19, Offices were found to be the preferred asset class among European investors. In this year’s survey, 39% of investors indicated Offices were their preferred property sector, a three percentage-point increase from last year. This improved sentiment for the future of the office was corroborated by the data looking at the demand for physical office space. In 2022, 47% of respondents expected similar or higher demand for physical office space in the next three years, compared to just 31% in 2021. Most investors that favored Office signaled that they are primarily seeking Grade A assets in centralized locations, indicative of an ongoing flight to quality.
In addition to Offices, Multifamily again attracted strong interest, and was the preferred asset class for 23% of investors, followed by Industrial and Logistics at 21%.
Pricing expectations have strengthened considerably since last year’s survey, with Offices seeing a strong rebound. Over 80% of respondents expect office pricing to remain stable or increase in 2022, compared to 14% who held this expectation last year. Furthermore, the two sectors hit hardest by the pandemic, Hotels and High Street Retail, saw the overall percentage of investors seeking discounts drop by 34 and 24 percentage points respectively. Class A Offices, Multifamily and Industrial and Logistics are the sectors where pricing is expected to remain the strongest.
Value-add strategies were also the focus of strong interest in the 2022 survey. According to the findings, investors are increasingly turning to value-add opportunities in search of higher yields. This was particularly evident in the UK where 45% of respondents selected value-add as their preferred strategy, while only 12% opted for core. Investors from Germany and France were more conservative with 35% and 30% choosing value-add and 19% and 20% opting for core, respectively.
As a seasoned real estate analyst with a track record of comprehensive market insights, I delve into the intricate dynamics of the European real estate landscape with precision and expertise. My understanding extends beyond mere statistics, allowing me to decipher the nuanced trends and factors shaping the industry. Now, let's dissect the key concepts embedded in the article:
-
London as the Most Attractive City for Real Estate Investment:
- London retained its position as the most attractive city for European real estate investment in 2022, according to CBRE’s 2022 EMEA Investor Intentions Survey.
- This marks the second consecutive year, underlining London's sustained appeal to investors.
-
Top Three Cities and German Cities' Positive Investor Sentiment:
- Paris and Amsterdam secured the second and third spots in the ranking.
- Berlin and Frankfurt followed, highlighting continued positive investor sentiment toward German cities.
- Germany was ranked highest in terms of expected performance, with a significant portion of cross-border investors anticipating strong performance in 2022.
-
Investor Confidence in Germany and the UK:
- Germany's real estate market experienced a remarkable 39% increase in investment volumes in 2021, contributing to high expectations for 2022.
- The UK moved up to the second position overall from fifth place in 2021, with nearly 25% of investors expressing confidence in its performance in the coming year.
-
ESG Strategies and Asset Enhancement:
- 70% of investors have implemented Environmental, Social, and Governance (ESG) criteria in their investment practices in 2022, a four percentage-point increase from the previous year.
- Asset enhancement emerged as the primary method for meeting ESG criteria, as indicated by 80% of investors.
-
Preference for Offices and Hybrid Working Impact:
- Despite the rise of hybrid working due to Covid-19, Offices remained the preferred asset class among European investors.
- 39% of investors identified Offices as their preferred property sector in the 2022 survey, showing a three percentage-point increase from the previous year.
-
Interest in Multifamily, Industrial, and Logistics:
- Multifamily attracted strong interest, being the preferred asset class for 23% of investors.
- Industrial and Logistics followed closely at 21%, demonstrating a diversified investment portfolio approach.
-
Pricing Expectations and Value-Add Strategies:
- Pricing expectations strengthened notably, with over 80% of respondents expecting stable or increased office pricing in 2022.
- Value-add strategies gained prominence, particularly in the UK where 45% of respondents preferred this approach for higher yields.
- German and French investors were more conservative, with 35% and 30% choosing value-add, respectively.
These key concepts collectively reflect the dynamic landscape of European real estate investment in 2022, showcasing the resilience of certain sectors, evolving investor strategies, and the continued importance of factors such as ESG considerations.