Although there is a «deterioration of the market’s sentiment», the fact is that right now there is «capital which is already compromised and ready to be distributed within the European office segment», revealed consultant Savills Aguirre Newman in its report "Oficinas en Europa - Primavera 2020" (Offices in Europe – Spring 2020) published last week.
And the fact is that the combination of this market sentiment mismatch with the need to distribute capital might result in a «price adjustment in some core cities», although this process might be «complex», advanced the consultant.
According to the consultant, this scenario is due in large part to the «caution banks had concerning office prices in prime assets». For example, «the ratio loan to value offered in core contracts is decreasing from 65% to 55%, limiting the purchasing power of buyers with mortgages. The focus will be on the strength of the clauses from the existing tenants, especially banks and insurance companies».
We now see operations taking place within this segment aimed at refinancing debt, which might generate «new core purchase opportunities for institutions with ample liquidity which before would have been unable to compete with leveraged buyers», advanced the consultant.
For value add and core-plus investors, this is an opportunity to create value for their portfolios, since «the price of these risk profiles is more influenced by very powerful macroelements».
Nevertheless, Savills Aguirre Newman’s projections point towards a reduction in international activity when compared to previous years, especially in Southern, Central and Eastern Europe.
