European property investment attractive despite falling yields

real estateSurging investment activity is seeing property yields fall in many European markets, with the best buying opportunities in the industrial sector.

Real estate adviser DTZ has released its European Fair Value Index and has identified the most attractive office, retail and industrial markets for property investment on a five-year hold period.

The report shows that Europe still offers plenty of opportunities to invest, with 46 markets classified as underpriced in the second quarter (Q2) analysis. The top ranking markets this quarter are all industrial markets, located in Belgium, Denmark and the Baltics.

However the `Fair Value Index has fallen to 62 in Q2 of 2015 from 69 in Q1 meaning that although commercial property markets are still attractively priced, their relative value compared to government bonds has deteriorated, narrowing the window of opportunities for investors.

Matteo Vaglio Gralin, associate director at DTZ, says: “Looking forward we expect the fair value index to fall further as more European property markets become fully priced. However, investors willing to seek them out will still find attractive opportunities.”

©2015 funds europe