The chase for yields for investors is becoming harder with several top European cities overheating, says on line real estate agency Tranio in a report. For 2019, the agency sees property investors focusing on four areas: microapartments, warehouses, coworking areas and nursing homes.
Yield reduction is a trend common in the European real estate market, dropping from 6 percent in 2009 to 4 percent in 2017. Securing a three percent rate of return is deemed as being a “rather optimistic scenario,” says Tranio, pointing out that this rate of return in cities such as Paris, Berlin and central London is attainable but these capitals are seen by many as being overheated.
Looking ahead at next year, the report says that "housing affordability is the most important social challenge that will affect the real estate market in the near future.”
“One of the ways to tackle it in large cities is microapartments, apartments with an area of 17–35 m2 which are inexpensive due to their small floor area,” it adds.
Investors usually buy microapartments for renting them out to students, business travellers, young professionals and tourists. A growing number of one person households and students also contribute to the popularity of this type of real estate. In Germany, this trend has taken off in recent years, with the value of transactions in student housing soaring while in Greece, real estate investment company (REIC) Pangaea has made its first deal in the sector.
Pangaea, the real estate arm of National Bank of Greece, is building a 48 room fully furnished student housing unit in Patras, a city of 170,000 people with its own university in the Peloponnese.
Another area of real estate topping the global list of promising commercial assets are warehouses.
“Investors note aggressive price increases and lower yields, but demand does not decrease as there is an extreme shortage of supply in the market. A particularly positive forecast is for warehouses on the outskirts of cities within the so-called ‘last mile’: they store goods until ordered online before delivering them to customers,” says Tranio.
In Athens, brokers have reported rising demand demand for logistics related assets, particularly in the port area of Piraeus, which is tipped to show strong growth in coming years but few assets being on offer.
One of the newest and hottest international trends in property is providing coworking spaces. In Athens, there have been a few such investments, helping turn around some run down parts of the capital where cheap property prices have started heading higher, mainly due to the country's tourism boom.
‘The share of co-working, small companies, business incubators is growing. Requirements to flexibility of space, ability to divide it are becoming increasingly important,’ says Tranio.
With global populations ageing fast, another focus area are nursing homes and health care. Despite birth rates in Greece having plummeted during the country's economic crisis, boosting the average age of its population, no significant new deals have been announced in this sector.
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