European Real Estate Snapshot

A monthly in-depth coverage of the latest developments in the European Real Estate market.


November 2019

Focus of the Month

Logistics continues to gain traction

In the past year, European real estate market experienced significant low yields but despite the low yields, real estate market sustained investors’ confidence with government bond yields at record lows.

  • Logistics sector continues to gain tractions in terms of investor and occupational demand. Over the quarter, prime rents increased by 0.5% indicating an annual yield of 2.8% but on the other hand average prime yields contracted by 6bps reaching 5.59%.
  • Office sector has experienced QoQ rental growth of 0.7% and an annual growth of 3.3%. In 2020, annual growth is expected to fall to approximately 2% on account of shortage of prime spaces in major cities.
  • Retail sector is currently mature with flat rental growth. Outlook for the sector remains tepid primarily due to rise of ecommerce, shifting consumer behaviour and the impact of soaring rental costs on store profitability.
Strong global investor sentiment for the European logistics real estate market

Within the commercial real estate landscape, logistics space has achieved recognition globally because of its bright outlook and has resulted in rising investments. Investors have been consistently listing logistics real estate funds on exchanges.

With the boom of ecommerce sector, distribution warehouses are also gaining traction as an asset class and gaining attention from investors. This is primarily driven by strong fundamentals and lucrative income returns in a low yield and bond rate environment. Warehouse spaces, which were previously perceived as cost centres, are now being considered as assets of strategic importance with an aim to provide more convenient and faster delivery to consumers.

While the demand for new spaces is surging, the supply is still very sticky which has pushed transaction prices and rents upwards while lowering the yields. The increased demand and the yields pattern observed are thought to be the primary drivers of increased capital inflows in logistics. The amount raised by European logistics real estate investment vehicles is expected to double with warehouses and industrial properties continuing to be in the limelight. As per a recent research, funds that focus on industrial assets, logistics properties and other buildings in this segment, such as last-mile facilities and light-logistics sites, are expected to raise around $6.4bn this year, an increase of 120% compared to $2.9bn last year.

The scenario however is not entirely risk-free. Macroeconomic hiccups like U.K.'s departure from the European Union and political instability might give rise to uncertainty among investors. Another major concern is the rise in interest rates which might narrow the yield spread.

Logistics investors snapshot
  • Blackstone real estate funds recently purchased a French Logistics portfolio from Patrizia for €260m. The portfolio comprises of 10 properties covering around 362,721 sqm. This shows Blackrock’s bullish stance in the logistics space.
  • Nuveen Real Estate acquired Phase III of a logistics hub in Venlo, Netherlands. The complex comprises over 118,000 sqm of rental space with an additional 43,416 sqm being added.
  • Savills IM has launched its third open-ended logistics fund, after its predecessor closed at more than twice its fundraising target.

Key Themes

Increasing demand of Co-living housing
  • There was a 2.9% increase in housing prices in Europe in the last year alone. The prices in the UK have tripled since the start of the century without a concurrent increase in average household income. This has pushed rents to unimaginable levels, especially for the younger generation working in major cities. This demand along with the rising loneliness and the emergence of a sharing economy has led to the boom of co-living/communal housing projects.
  • Even though students and young professionals form a huge proportion of the current residents of co-living spaces, there is a growing interest amongst the older generations as well. Co-living was marketed as affordable living spaces for students near their universities and workplaces but lately the concept has reached a wider audience with the emergence of co-housing communities where families or older individuals share resources, space and mutual support, effectively taking charge of their communities. Even in Sweden which has one of the highest percentages of individual living in the world, at almost 50% of all households, this kind of communal living is on a rise.
  • There have not been many transactions of stabilized assets changing hands and thus any pricing point would be based on very little information. But with the exponential rise in the demand for co-living spaces, there are multiple developments which could give more insights into how these assets are priced considering multiple factors like tenant affordability and expectations, time taken for planning and development, optimal utilization and separation of public and private spaces etc. The financing of these houses has also not gained much traction yet.
Care homes and elderly housing demand in Europe
  • Physical limitations in old age leads to the need for elderly housing and care homes. Its demand is expected to rise due to growing elderly population, rising elderly incomes and housing being a relatively high proportion of their expenditure. Population above the age of 75 can potentially double by 2050 in the EU. Demand for elderly housing and care homes in the EU is expected to increase in volume by 3.5% per year until 2030.
  • Care homes and elderly housing is more prevalent in Western European countries when compared to Eastern Europe as they value elderly care and support more. Eastern European countries like Poland and Czech Republic consider professional elderly care and housing less important compared to other countries.
  • Demographics, income & wealth potential of elderly people and their housing preferences drive the demand of care homes in a country. Comparing across these factors, in the EU, the Netherlands tops the list in terms of potential demand for care homes and elderly housing driven by the high net wealth of the elderly and their willingness to opt for elderly housing in the country. By 2030 the Netherlands is expected to have one of the highest net wealth for people aged above 75 in the EU at approximately €200k. Spain has a much higher elderly population compared to the Netherlands but relatively lower expenditure on elderly housing and care puts them second on the list.
  • In the UK, this sector saw an attractive investment of £350m in 2018 which is approximately 24% of all healthcare deals recorded in that year. Also, it is seen that people are migrating away from large institutional care homes to smaller ones due to lower cost and more personalized care in the latter.
Pension Funds prefer UK/Europe for real estate allocations
  • Real estate funds in the United Kingdom have seen a large allocation of capital from the domestic pension funds in the second half of 2019. A large number of the recently analysed pension funds are said to have made repeat commitments to domestic real estate firms across Europe particularly in the UK with around £435m allocated to funds there.
  • The London Borough of Croydon Pension Fund recently committed £60m to M&G Investments. M&G’s Real Estate wing targets private rented residential real estate that offer investors minimal costs and maximised results.
  • Another UK pension fund, Merseyside Pension Fund, decided to stay local by committing £15m to Barwood Capital Regional Property Growth Fund IV for the second time after committing £12.5m in 2017.
  • US pension funds too have shown interest in diversifying their portfolios with European investments as a transatlantic capital flow of over €1.25bn was witnessed to pan-European funds. Three New York based retirement systems invested $310m to Blackstone’s Real Estate Partners Europe Fund VI fund, which is approaching its $10bn target. AG Europe Realty Fund III that focuses on purchasing attractively-priced assets in liquid institutional markets in Western Europe too received $100m from Pennsylvania Public School Employees’ Retirement System and $75m from Minnesota State Board of Investments.

Funds in the Market

Strategy Institution Regional Focus Asset Focus Status Fund Size (mn)
Value-Add Greystar US Multifamily Closed € 2,000
Mezzanine CRE Loans Walton Street US Commercial Real Estate Closed $ 1,300
CRE Debt LaSalle Investment Management Pan-European Commercial Real Estate Raising € 1,000
Value-Add Pennybacker US Mixed-Use Commercial Closed $ 1,000
Opportunistic AECOM and Canyon US Mixed-Use Commercial Closed $ 500
Value-Add Weinberg Capital France, Germany Mixed-Use Commercial Closed € 300

Recent Transactions

Snapshot of Key Deals
Asset Name Buyer Seller Asset Type Location Price (mn)
Office Portfolio AXA IM RE Northstar Realty Europe Office Europe-wide € 1,100
Hotel Portfolio AXA IM RE Principal Real Estate Europe Hotel Majorly Germany and Austria € 545
Logistics Portfolio Blackstone Patrizia Logistics France € 260
Mixed Portfolio Tristan Capital Partners Eversfrank Group and Universal Investment Mixed Germany € 250
Disneyland Hotel Portfolio Benson Elliot Real Estate Partners V and Schroder Real Estate Undisclosed Hotel Paris € 240
Office Property Primonial Balzac REIM Office Paris € 143
Office Property M&G Real Estate Barings Real Estate Office Milan € 136
Office Portfolio Kingstone Investment Management Undisclosed Office South & West Germany € 90
Asset Name Lender Borrower Asset Type Location Loan Amount (mn)
Warsaw Spire Tower om Warsaw Helaba, Berlin Hyp, pbb Deutsche Pfandbriefbank IMMOFINANZ Office Poland € 230
Residential Towers in Manchester Maslow Capital Undisclosed Residential UK £ 123
Logistics Property in Mönchengladbach DekaBank Samsung Securities & KB Securities Logistics Germany € 119
Office Property in Helsinki pbb Deutsche Pfandbriefbank Fleming Properties Office Finland € 78
Office Building in Brussels Rothesay Life Korea Investment Management Office Belgium € 73
Jahrhunderthalle' Complex in Aachen Hamburg Commercial Bank Oaktree Capital Group subsidiary Kadans Science Partner Science Park Germany € 57
Buckley Office Building in Farringdon Canada Life Investments CBRE Global Investors Office UK £ 46
Caleido Mixed-use Building in Stuttgart DekaBank Hines Pan European Core Fund HECF Mixed-Use Germany € 42

Key Indices

Key Indices 31-10-2019 YTD 1-YEAR 3-YEAR 5-YEAR
MSCI World Real Estate 233.94 21.1% 19.1% 21.1% 20.2%
STOXX Global 1800 Real Estate 291.52 21.2% 19.6% 22.1% 22.1%
STOXX Europe 600 Real Estate 184.55 17.5% 10.2% 13.5% 17.3%
Dow Jones US Real Estate 370.72 25.3% 19.9% 22.8% 26.6%
STOXX APAC 600 Real Estate 264.01 14.0% 18.5% 14.5% 10.9%
Property REITS - Europe 31-10-2019 YTD 1-YEAR 3-YEAR 5-YEAR
Retail 59.17 1.7% (13.8%) (31.0%) (43.7%)
Office & Industrial 291.52 21.2% 19.6% 22.1% 22.1%
Property REITS - US 31-10-2019 YTD 1-YEAR 3-YEAR 5-YEAR
Retail 355.26 (12.8%) (21.9%) (30.6%) (31.2%)
Office 343.35 18.3% 8.7% 0.9% 1.1%
Healthcare 203.52 25.1% 25.3% 14.4% 11.6%
Industrial 469.98 45.5% 36.0% 65.7% 112.6%
Diversified 277.86 32.3% 27.9% 44.3% 54.2%


This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material is not financial research and was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and Oxane Partners has no obligation to provide any updates.

This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. The information contained in this presentation is not intended to be used as a general guide to investing, or as a source of any specific investment recommendation.Views and opinions expressed are for informational purposes only and do not constitute a recommendation by Oxane Partners to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.Sources: PERE, Real Estate Capital, Gulf News, South China Morning Post, Savills, Knight Frank, Deloitte, JLL, Institutional Real Estate, Bloomberg, propertyfundsworld, Cushman & Wakefield, Heitman, Urban Land Institute, Financial Times, SWFI