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THINK European Cities: Trends and tactics Q1 2018

European cities

Our latest European research predicts investment volumes for European real estate will be in line with those of 2017, despite international market volatility experienced in February.

The financial market volatility in early February, which included an upward trend in bond yields, rekindled the discussion of the era of real estate yield compression nearing its natural end. As long as the correction can be contained, it should be greeted as a welcome start to an orderly normalisation. For real estate, it may come just in time before markets move cap rates to such extremes where any disruption could only end in a hard landing.

Our report highlights that investment activity was up in 2017 compared to 2016, but fell short of the record-year 2015. The big three markets of Germany, France and the UK, all recorded higher volumes along with smaller markets. Most remarkable is the recovery of the UK market, despite Brexit uncertainty. This was predominantly overseas investors lifting volumes in the UK. This is in line with Germany where, for the first time, cross-border buyers have deployed more than domestic groups.

Our research highlights logistics in Southern Europe and the Netherlands as the top investment recommendation. German offices have also performed well and occupier dynamics point to further upward pressures in the key centres. In fact, gross take-up rates are way ahead of long-run averages, by 50-60% in the big four German markets. European retail spending in 2018 is forecast to be in line with that of 2017, which saw sales grow to c.2.3%.

In terms of Eurozone growth, 2017 brushed aside geo-political concerns to grow by an impressive 2.5%, demonstrating the best growth results in a decade. A strengthening euro may temper output, however, a healthy mix of increased consumption, investment and exports bodes well for 2018.

THINK European Cities

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Issued by Nuveen Real Estate Management Limited, 201 Bishopsgate, EC2M 3BN. Authorised and regulated by the Financial Conduct Authority. TH Real Estate is a name under which Nuveen Real Estate Management Limited provides investment products and services. TH Real Estate is a real estate investment management holding company owned by Teachers Insurance and Annuity Association of America (TIAA). TH Real Estate securities products distributed in North America are advised by UK regulated subsidiaries or Nuveen Alternatives Advisors LLC a registered investment advisor and wholly owned subsidiary of TIAA, and distributed by Nuveen Securities, LLC, member FINRA. 436656-G-INST-O-03/19

Stefan Wundrak

Stefan Wundrak

Head of European Research

Stefan's biography