The reason for such unsatisfactory results is hidden behind a few factors. Investor demand remained strong however the market suffers not only from a small number of products offered for sale but also from some financial limitations imposed as a result of “credit crunch” observed in western Europe. The gap between interest rates and yields, which investors and developers are primarily concerned with capitalising on, continues to narrow and as a result we have seen some of the larger market players taking more careful steps. Many decisions regarding purchases were delayed until 2008, some due diligence procedures were subject to deeper and more detailed analysis and negotiations were being prolonged. At the end of 2007 some investors appeared to wait to see how the investments market developed into 2008
The office and retail sectors were the most popular, collectively accounting for over 90% of total investment volume, with the mix-use and industrial sectors responsible for the remainder.
2007 also saw a number of development investments or sale&lease back transactions. Investors are more open to take higher risk at lower prices and be involved in more active undertakings including marketing and leasing of the purchased projects.
Yields have shown some stabilisation. Prime office yields remain at the level of 5.4 – 5.5% and industrial are in the region of 6.5%. Prime retail yields have shown some compression and were recorded at 5.7% in Q4. Regional yields are remaining stable, with some transactions for office and retail products exchanging at circa 6%.
