Investment market
Prime office yields across Europe (in %)
Source: EHL Market Research | BNP Paribas Real Estate | Q3 2019
Investment market
in 2020 were secured a few years ago by mainly institutional investors using Forward Purchases in the very early stages of development (e.g. Bel & Main and The Icon Vienna). This trend can also been seen for properties due to be finished after 2020 (e.g. the sale of QBC1+2).
The Vienna office investment market is, as a result of investment pressure, still characterized by a considerable excess in demand and has exceptional future potential. As a result of the continued zero- interest policy of the ECB, the high market liquidity, and the comparably stable Austrian economy with its relatively low vacancy rates, price increases – sometimes considerable – have been recorded in all segments. Prime yields for newly-developed and long-term rented top properties in good locations have hit a record low of 3.5 %, for exceptional locations with long-term top tenants yields are even lower. For average locations yields are already trending towards 4 %. As a result of the latest interest rate decision by the ECB it is expected that prices will continue to develop further upwards in the coming months. Especially because of the scarcity of high-volume core projects, investors are concentrating strongly on middle-sized properties between 25 and 100 million EUR, although even in this segment the number of properties available is the limiting factor for the transaction volume. The market for high- quality newly-built properties is by and large empty – even properties due to be finished this year or
Focus shifts on existing properties and beyond Vienna
The scarcity of top office properties in the core market of Vienna is leading investors to look more and more at other quality segments or to other segments of the market. As a result, there is more focus on the regional capitals, in particular on Graz, Linz and Salzburg. A considerable amount is flowing into the residential segment as more and more buildings are being developed for rental rather than for sale; the buildings are then sold via global sales to investors. German investment funds and pension funds are very active in this product category. In general, German-speaking buyers are still the biggest group on the Austrian market. However, the increasing interest of Asian investors is clear to see, as shown by the recently completed sales of the T-Center or the Hilton Vienna am Stadtpark.
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