Reuters
Aviva, CBRE Investors see Europe as more attractive vs UK
LONDON - Surging commercial real estate values in the UK is causing European property investors to shift their focus to the continent as they chase strong returns there, property experts told a conference on Friday.
"We are seeing much more interesting opportunities on the continent ... Pricing in the UK, while it still offers value, is less compelling than it was a year ago," Ian Gleeson, chief investment officer of CB Richard Ellis Investors, said at the London Business School's Real Estate Conference.
UK commercial property values have risen 13 percent since July 2009 as the market rebounds from a two-year downturn, although the tenant market remains weak with average rents continuing to decline.
Ben Stirling, managing director at Aviva Investors, said the firm estimates ungeared continental property returns at an aggregate 7.5 percent from 2010 to 2015, compared with its forecast for the UK of about 8.5 percent.
"On the face of it, the UK appears attractive from a returns perspective, but a lot of the value in the UK is being delivered during the course of this year and we expect the returns profile will be less compelling going forward," Stirling said.
Both firms see value in the French and German commercial property markets, while Aviva is also interested in other western European regions, such as the Nordics and Benelux.
Stirling said he was concerned about debt issues in "fringe" markets such as Spain and Ireland.
Land Securities Chief Executive Francis Salway defended the London office property market, saying prospects for the sector were strong as developers had not overbuilt as they had in the early 2000s.
"London is a global city, a lot of businesses are not serving Newcastle or Manchester, they are serving Singapore, Hong Kong, New York," he said, adding London firms have continued to plan their expansion in line with global growth.
Last November, Land Securities unveiled plans to kick-start three new developments in London's West End retail and business district this year, for delivery in 2012-2013.
"We are seeing much more interesting opportunities on the continent ... Pricing in the UK, while it still offers value, is less compelling than it was a year ago," Ian Gleeson, chief investment officer of CB Richard Ellis Investors, said at the London Business School's Real Estate Conference.
UK commercial property values have risen 13 percent since July 2009 as the market rebounds from a two-year downturn, although the tenant market remains weak with average rents continuing to decline.
Ben Stirling, managing director at Aviva Investors, said the firm estimates ungeared continental property returns at an aggregate 7.5 percent from 2010 to 2015, compared with its forecast for the UK of about 8.5 percent.
"On the face of it, the UK appears attractive from a returns perspective, but a lot of the value in the UK is being delivered during the course of this year and we expect the returns profile will be less compelling going forward," Stirling said.
Both firms see value in the French and German commercial property markets, while Aviva is also interested in other western European regions, such as the Nordics and Benelux.
Stirling said he was concerned about debt issues in "fringe" markets such as Spain and Ireland.
Land Securities Chief Executive Francis Salway defended the London office property market, saying prospects for the sector were strong as developers had not overbuilt as they had in the early 2000s.
"London is a global city, a lot of businesses are not serving Newcastle or Manchester, they are serving Singapore, Hong Kong, New York," he said, adding London firms have continued to plan their expansion in line with global growth.
Last November, Land Securities unveiled plans to kick-start three new developments in London's West End retail and business district this year, for delivery in 2012-2013.
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