<
You are here : HOME > NEWS > Investment set for another good year

Investment set for another good year

At the beginning of the year, the sale of the Finance Tower - the largest office building in Belgium - for approx. € 1.2 billion was closed. This is the largest real estate transaction ever in the history of Belgium and it will also be one of the largest transactions of the year in Europe.
At the beginning of the year, the sale of the Finance Tower - the largest office building in Belgium - for approx. € 1.2 billion was closed. This is the largest real estate transaction ever in the history of Belgium and it will also be one of the largest transactions of the year in Europe.

Real estate advisor JLL has produced a report looking at the appetite of investors for the Belgian market. The first title in the report sets the scene: ‘Investor appetite for Belgian real estate was never higher’. Looking towards 2020, JLL finds that investors are ready to buy more property assets, as most economists believe that the low interest and low inflation environment will continue for a few more years and bank financing for property transactions is easily accessible. Where asset classes are concerned, ‘expect the unexpected’, is the message. For example, JLL points out that the most important transaction of 2019 was the purchase by Cofinimmo of a portfolio of home care centres worth € 297 million. They also saw the sale of leisure parks Vossemeren and Erperheide to REIT Aroundtown for € 240 million.

Yield compression
< This growing investor appetite is quite naturally having an impact on prices. Top yields are shrinking again and during the course of 2019 office yields fell by 35 bps to 3.9%. Offices also look set for another good year. Following the largest ever transaction on the Belgian market (1.2 billion Euros for the Finance Tower at the beginning of this year), other transactions in the pipeline and the high investor appetite mean investment volume for 2020 is on track to break records yet again. There is still a margin for compression, certainly when comparing with yields applicable in neighbouring countries. Almost half of respondents believe that yields will remain at their current level of 3.9%, while almost another half (44% and 48% respectively) expect to see compression to 3.5%.

Predictions
< To compile its survey, JLL sent out 3,000 e-mail questionnaires and collected the responses anonymously. Some answers to specific questions merit attention. For example, 79% of those responding believe that Europe will end up in a Japanese style scenario of low growth, low inflation, low interest rates and very low yields (2-3%). And this will be seen in concrete form; to the question asking what investors’ strategy will be in 2020, 75% said they would be buying more real estate assets. The asset class of value add (purchasing buildings and upgrading them to increase the value) also saw a major increase: from 14% of respondents purchasing this class in 2019, 44% say it is their policy for 2020. Just over half of the responses expect to see the prime rent remain at its current € 315/m²/year, but a third predict a rise to € 350.

Retail
JLL warns that in terms of yield, not all investment categories benefit from the low returns being seen in the office sector. Restraint is needed for the retail sector, given the general decline in rental values. This decrease has resulted in a 25 bp increase to 3.5% for High Street returns. And, again using the first title in this section of the report: ‘Respondents unanimously consider that retail will need another few years before recovery’. One to three years is the first expectation (51%) but almost as many (45%) believe it will take 3-5 years. The current uncertainty in the retail market has led to predictions for yields which are more or less the opposite of those for offices. From the current level of 3.5%, only 12% of respondents expect a compression to 3%, while 39% forecast no change, and 49% believe that retail yields will loosen to 4%.
Tim Harrup
13-03-2020


News in short
Retail: you haven’t seen anything yet - CBRE | 9/4
Realty cancelled in its turn | 8/4
Positive outlook on long term for the logistics real estate | 7/4
UPSI calls for action on retail rents | 6/4
Propel by Mipim makes its (deferred) debut | 6/4
Vision of Real estate in 2030 : 10 ways in which the way we use buildings will change | 6/4
OP acts for medical staff | 3/4
Cores brings new office concept to Antwerp | 2/4
Office building projects in the pipeline | 2/4
Controversy over partial return to work in the construction sector | 1/4
Immobel takes stake in Multi Tower | 1/4
Smartphone-operated security for buildings | 31/3
Codify best practices in ethics | 31/3
'The Platinum' sold | 30/3