Demand for European commercial real estate predicted to grow in 2018

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Spanish property mortgages

A survey of property investors by Knight Frank has shown that 58% of those asked, predicted that commercial real estate demand in Europe will rise in 2018 compared to 2017.

The main property areas that investors are interested in are industrial, distribution, healthcare and student accommodation. As little as 15% of respondents prioritise offices as their main area of interest. The retail sector and hotels are low priorities for investors.

Chris Bell, Knight Frank’s European managing director, predicted that the total amount invested in European commercial property will exceed 2017’s total of €220 billion.

Germany and Spain could overtake the UK as the preferred country for property investors.

In Spain, there is concern about the effect of the Catalonia independence issue, but the Spanish economy is strong. Demand for industrial property and office space is expected to remain high whatever happens in the Catalonian region.

The Bank of England is expected to raise interest rates from 0.25% to 0.5% by the end of 2017. This will make commercial mortgages more expensive, but not by a lot. An increase in commercial mortgage interest rates should not deter commercial property investors, but the Brexit negotiations could impact the UK commercial property market.

Bell added:

“The overriding concern for investors is pricing, driven by competition from private and foreign buyers seeking a currency arbitrage. As a result, we expect to see investors looking beyond London to regional cities to find value.”

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