DTZ today announced the release of its fifth annual Outlook report providing key insights for both occupiers and investors for 2014 and the years ahead.
The rankings included in the report are based on key economic and market decision-making factors and reflect a marked difference between the factors influencing investors and occupiers. Factors of primary importance to investors are ease of investment, and the opportunities and returns available for a market over the investment period, whereas occupiers are primarily interested in market accessibility, availability of space and talent and business opportunities for the location.
Brussels top for European occupiers
Brussels is the top ranked occupier market in Europe for both 2014 and 2017 according to DTZ’s Outlook report.
This reflects the fact that the city attracts a wide range of businesses wanting to be in close proximity to EU decision makers. However, at a global level, Brussels is only placed 15th in the 2014 rankings, which is expected to slip further to 16th place in 2017, a reflection of the rise in competition from other global cities.
Dublin is also well placed in the 2014 European occupier ranking because of its accessibility to foreign investment and high labour productivity; however it doesn’t make the top five in 2017. Instead, Warsaw, Amsterdam and Frankfurt feature highly in both the 2014 and 2017 top five occupier rankings as large economic and business centres with a relatively broad mix of industries and employers. Warsaw occupiers have especially benefitted from significant and affordable supply over the last three years.
Richard Yorke, Global Head of Occupier Research at DTZ, says: “The fact that Brussels tops our European occupier list for 2014 and 2017 is perhaps not surprising when you consider that the city is the home of the European Union and colloquially described as the ‘capital of Europe’. However, we recognise that corporate occupiers’ decisions on location are multi-faceted and are typically driven by the industry they operate in, access to talent, suppliers and customers and structural factors such as political framework, tax and regulatory framework. Given the complexity of this decision making, we have carefully selected factors in the report which try to capture this. These factors are independent and quantifiable.”
London remains top for investors
London is ranked the top destination in Europe for investment over the next three years, according to DTZ’s Outlook report. London also ranks second globally in 2014, moving to the top spot in 2017.
Globally, most European investment markets lie mid-table in the 2014 Outlook rankings, between the US and Asia Pacific, with only London making the global top five. However, in 2017 three European markets make the global top five.
Nigel Almond, Head of Capital Markets Research at DTZ, says: ”At a global level, the London office market vies with the New York office market to take the top spot for 2014. However, London is expected to stand on top in 2017. London’s top position reflects the high level of trading in the city which offsets its high volatility and weaker pricing. While liquidity is important for many global investors, they should not ignore the fundamental drivers of risk and return.”
Across Europe, the Southern European markets, Madrid offices and Milan retail, perform well in the 2014 European ranks, reaching second and fourth place. However in 2017, the top five is dominated by the German and Benelux markets, Brussels and Amsterdam offices and Munich retail.
Given the mixed economic outlook for Europe, DTZ expects the commercial real estate market recoveries to vary in speed and strength in the short term. As more markets recover, DTZ’s analysis shows that local markets are driven more by the fundamental drivers of risk and return.
Magali Marton, Head of European Research at DTZ, says: “Our research suggests that investors should focus on Southern European markets because of strong relative pricing and capital values, which are still well below their pre-crisis high. However as the recovery takes hold, and these markets re-price, investors should look to German and Benelux markets, which have stronger relative pricing and lower volatility. For example, Hamburg industrial and Amsterdam offices.”
