The geographic and economic position of various markets in Europe are now working together to encourage foreign investment towards the north and away from the south.
“We’ve seen a huge drop-off in turnover in those southern markets but at the same time, we’ve seen very strong capital flows into the northern markets and perhaps pricing is even more aggressive than it’s been recently,” says Jonathan Hull, Managing Director of CBRE Global.
Projects with high level of vacancy in markets that are challenged in the south are finding it very difficult to achieve anything like acceptable pricing. Whereas in London, where there is relatively low supply in the market, we’re seeing premium pricing being paid for very core product. Short leases are not seen as such a bad thing in those markets where you’re seeing high levels of tenant demand in core locations.”
Meanwhile, the southern areas of Europe—including Greece, Italy, Spain and Portugal—are struggling with debt crises domestically and can’t attract capital in foreign markets because of increased risk.
“We’re seeing the austerity measures that are being taken in those countries having an impact on the leasing markets and consequently on the sentiment from investors and therefore on turnover,” says Hull. “With the softness in the occupational markets in most countries, leasing risk and vacancy are obviously very difficult to price and also very difficult to raise debt.”
