Friday 19 January 2018

Commercial property on the up as QE weakens the euro

ECB headquarters in Frankfurt
ECB headquarters in Frankfurt

Neil Callanan

Commercial property deal makers have become some of the main beneficiaries of Euro area quantitative easing (QE).

Commercial property purchases in the euro area surged 32pc in the year through June, according to London-based broker Knight Frank, with investment transactions totalling €104.2bn. Deals tripled in Portugal and more than doubled in Spain.

International investors are plunging into the market as the European Central Bank (ECB) president's attempts to jump start economic growth triggered a 19pc slump in the value of the euro against the dollar and 11pc against the British pound. In Ireland and beyond rents are climbing as the economy recovers, because there's been a shortage of new construction since crash, according to asset manager M&G Real Estate.

"After a couple of years of double-digit returns in the UK and the US, investors feel Europe is next," said David Jackson, who manages €1.2bn of European property at M&G Real Estate. "One of the key stimuli for that has been the QE package."

M&G Real Estate has been buying food stores in Germany and retail properties in cities such as Milan and Copenhagen to benefit from increases in consumer credit that should boost demand for retail property, raising rents and values, he said.

Total return, a combination of rental income and value gains, from commercial real estate in mainland Europe was 4.45pc in the second quarter, the highest in at least six years

Yields for the best office properties are 5pc in Barcelona and 6pc in Lisbon, compared with 3.5pc in London's West End, Knight Frank said. (Bloomberg)

Irish Independent

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