Investment market
Prime yields on office properties in European comparison (in %)
Source: EHL Market Research | BNP Paribas Real Estate | Q2 2023
Investment market The Austrian real estate investment market has had a challenging but thoroughly satisfactory year overall in 2022. Although the transaction volume declined by around 10 % year-on-year, at just over EUR 4.1 billion it nevertheless remained well above the forecasts, some of which had been very pessi- mistic recently. The first half of 2022 was still in line with expectations. After a marked slump from the middle of the year, however, there was a noticeable recovery in the last quarter, so that a number of medium-sized transactions made up some ground before the end of the year.
the values of the top properties from the respective segments are comparatively less affected by price and demand declines than properties in weak loca- tions, with vacancies or technical deficits. Top properties that can score points with long-term leases with tenants of the best creditworthiness and 100 % linking of rents to the consumer price index are particularly in demand, as the annual rent increases counteract any loss in value due to the general rise in yields. Nevertheless, EHL is cautiously confident for the entire year 2023. At present, we are already regis- tering significantly more interest from investors than in autumn 2022 or at the beginning of the year. At present, however, the price expectations of potential buyers and sellers are still too far apart, so that few deals are being concluded at the moment. It will probably take some time until a new market equilibrium has formed. We expect transaction activity and closings to increase in the second half of the year. The general conditions are currently challenging in all areas of the investment market. However, it is foreseeable that the office asset class will continue to form a significant part of institutional investors‘ portfolios in the future and will enjoy corresponding demand.
The market has coped well with rising commodity prices, economic weakness, supply chain issues and the Ukraine conflict, but the ECB‘s change in interest rate policy and the subsequent significant increase in financing costs have had a strong nega- tive impact on both transaction activity and prices. Following the rise in interest rates in 2022, which continued in the 1st quarter of this year, there was a slowdown in transaction activity and a wait-and- see attitude among market participants on the one hand, and significant price differentiation with re- spect to property qualities on the other. Since this interest-driven development affects all segments, no use category can escape the trend. However,
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