London and Paris are the most resilient European property markets and are set to lead investment in 2020, new figures suggest.
In the face of changes brought about by the Coronavirus crisis, the top five liquid cities are London, Paris, Berlin, Frankfurt, Stockport and also Madrid, according to a report recently published by international property company, Savills.
With uncertainty limiting prime investment, core and liquid locations are likely to be top targets.
Nine different metrics were examined from liquidity levels to the handling of the Coronavirus crisis.
During the first three months of the year, European property investment has been surprisingly resilient, but Quarter 2 is forecast to fall around 40% year-on-year. However, it is expected that there will be a wide discrepancy between the performances of different cities and countries across Europe.
Markets less dependents on hospitality and retail sectors are likely to attract more investment, the report suggests.
The nine factors examined were:
- Resilience to economic fallout
- Share of tourism and retail GVA
- GDP growth forecast
- Five-year investment volume
- Five-year average share of office investment
- Share of multifamily investment Property
- Five-year average share of cross border investment
- Average number of quarters to post-GFC recovery
- Drop in investment volume post-GFC.
As a result, the top five most resilient cities are predicted to be London, Paris, Berlin, Stockholm, Frankfurt. They are followed by Brussels as well as Gothenburg.
“London is the most liquid market and we expect the British capital to keep catching investors’ attention. The market is heavily dependent on cross border money however most international funds traditionally looking into Europe have an office based in London. We expect the London investment market to bounce back quickly, especially as it was attractively priced before the pandemic,” says Savills.
“Paris is the second most liquid market. Although the recovery following the GFC was relatively long compared to other core cities, we expect this time will be different due to the intrinsic characteristics of the Parisian investment market: historically led by domestic investors with a very large share of office investments.”
Berlin, Frankfurt, Amsterdam, Hamburg, Dusseldorf and also Rotterdam are also liquid markets with a historical strong share of office and multifamily investments and recovered relatively quickly from the Global Financial Crash. Around half of their annual investment turnover is generated from foreign capital.
Despite widespread adoption of homeworking during COVID-19, Savills believes offices will remain the predominant workplace for some time, with liquid office markets continuing to capture investor interest.
The research covers 27 European cities – Amsterdam, Barcelona, Berlin, Brussels, Budapest, Bucharest, Copenhagen, Dublin, Frankfurt, Gothenburg, Hamburg, Helsinki, Lisbon, London, Luxembourg, Madrid, Malmo, Manchester, Milan, Munich, Oslo, Paris, Prague, Rome, Rotterdam, Stockholm and also Warsaw.
Savills believes there is no absolute ‘best location’ and that company-specific strategies drive the choice of the most attractive options.