For 2020, global real estate investment manager M&G Real Estate has named Amsterdam as the top investment choice for the residential sector in Europe, the Paris submarkets for offices, and Stockholm for logistics.
The firm cites Amsterdam’s first-place ranking in the OECD for work-life balance, 80% use of green transport to commute, and a 5% rental growth in unregulated assets as the reasons for its choice.
For the office market, M&G lists three factors for choosing the submarkets of Paris as its top investment pick - the opening of the Grand Paris infrastructure project, opportunities for leasing/capital expenditure (capex) risk, and greater value outside of the CBD.
Stockholm was chosen for logistics as it is backed by its fastest population growth in Europe, mature e-commerce market and attractive value-on-offer at a 4.75% net initial yield.
Overall, the outlook for European residential “remains highly attractive”, highlights M&G Real Estate in the report, “given the potential it offers for both diversification and income at this stage of the cycle.”
Meanwhile, the logistics sector in Europe has outperformed all other sectors for the sixth consecutive year, states M&G Real Estate. The firm expects this trend to continue.
“With both e-commerce and city urbanisation rates expected to continue growing, we expect rents for industrial stock in the right locations and with the best specifications to see further uplifts,” it notes.
The office sector in Europe is believed to remain a key target for investors, says M&G. In CBDs such as that in Paris, vacancy rates are exceptionally low, which would allow investors to take on measured leasing or manage capex risk to drive higher risk-adjusted returns.
Office investments in the Nordics continue to offer some of the best opportunities to maintain and grow income, highlights the report. Markets such as Utrecht, Brussels and Luxembourg offer “some of the best value with limited downside risk”, it states.
M&G adds that German cities with record low vacancies, such as Berlin and Munich, offer “some of the best income growth potential” in Europe’s office sector.
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