Investment market
Prime yields on office properties in European comparison (in %)
Source: EHL Market Research | BNP Paribas Real Estate | Q3 2022
Investment market The real estate sector has witnessed what appears to be the longest positive development cycle since 2008. However, rising interest rates seem to have halted this upward trend – a conclusion that has
from the Ukraine crisis and high inflation have star- ted to influence the prime segment. These factors are now reflected in price adjustments and, in many cases, to a “wait and see” approach by investors. The office market in Austria has always been a symbol of stability and low volatility. Rents in other European markets like Frankfurt, Paris and Berlin have been known to rise sharply in good times, but the Austrian market has been distinguished by con- tinuity and stability. The price level in this country changes much more slowly, and there is little room for speculation. Then again, this also points towards a substantially lower fallback potential, especially in volatile periods – a positive development that is currently visible on the market. In spite of today’s greater challenges, the office asset class will continue to play an important role on the investment market in the future with funda- mental demand coming from institutional as well as private investors. The issue of energy efficiency in combination with ESG and the EU Taxonomy re- presents a major challenge, and properties that are unable to meet these standards have an inherent potential that can be realised by specialised market participants.
been confirmed by many recent transactions. This development has touched all segments of the real estate sector without exception. Prime properties – regardless of the segment – will be less affected than buildings with vacancies or technical deficits. The office asset class has enjoyed sound demand in recent years. In line with earlier trends on the real estate investment market, the yields for prime products fell to historical lows while rental levels trended slightly upward. The beginning of the Covid-19 pandemic brought a clear price differentiation between the top office segment and the downstream quality segments. Demand was strong for properties in very good locations with long-term, first-class tenants and structural features that meet the increasing sustainability demands of the EU Taxonomy. In con- trast, older properties with weaker occupancy that are not taxonomy compliant were faced with yield mark-ups but also benefited from good demand. The current highly volatile, rising interest rate environment as well as the uncertainties resulting
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