Canadian and Middle Eastern investors are poised to grow their European presence with the Continent’s largest, most liquid markets set to benefit, analysis from Fidelity International finds.
In its quarterly European Investment Pulse, Fidelity anticipates US investors taking more of a back seat in 2017.
Meanwhile, Middle Eastern investors are expected to rebalance their near-term global acquisitions in favour of Europe’s largest, most liquid markets namely the UK, Germany, France and the Netherlands.
Fidelity foresees that the Middle Eastern total UK and core eurozone spend in 2017 will bounce back to around €5bn which is equal to the combined annual average of the past three years.
Traditionally heavily-skewed towards London, their purchasing activity is expected to shift towards core eurozone and regional UK in pursuit of sector and geographic diversification.
Elsewhere, Canadian investors – buoyed by the relative strength of the Canadian dollar – are also set to boost their European presence.
With European acquisitions totalling €3.4bn in 2016 – the highest since investment deal-by-deal records began in 2007 – Fidelity predicts another €3-5bn of new acquisitions per year, using a diverse selection of strategies, but continuing to focus mainly on Germany and the UK
Iryna Pylypchuk, senior European real estate analyst at Fidelity International, said:
“The eurozone’s ability to cope with the political uncertainty has been impressive, and with a further economic upturn in evidence in the latter quarter of 2016, another year of strong performance looks likely. The abundance of capital remains the key challenge for the European real estate.
“With several investor groups, such as French OPCIs and Swiss institutions rapidly seeking pan-European diversifications, we believe that intra-regional investors will grow in importance, reaching 35% of the core eurozone transactional market by the end of 2017, or the first half of 2018 at the very latest.
“However, the outlook for cross-regional capital flows is significantly more complex, and will continue to change in tandem with the global political scene. The recent strengthening of interest from Canadian investors is one example of new source of capital emerging in a meaningful way to complement the Middle Eastern and Asian investors who will continue to target Europe’s most liquid markets as the US capital retreats.”