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Analysts forecast growing investments in European real estate

Together with PwC, the Urban Land Institute (ULI) has published research that evaluates investment prospects for main European cities and different market sectors. Warehouse real estate, coliving and accommodation for the elderly and students are the most promising trends of 2020.

As a result of the forthcoming 2024 Olympics in Paris and the planned redevelopment of the city, Paris is ranked high in investment attractiveness for 2020. The 26-billion-euro infrastructure project involves the restructuring of the city's transit system, which will act as a catalyst for the development of new city districts. 

Berlin and Frankfurt took second and third place in the rankings, respectively, and London came in fourth. While many investors remain cautious and have suspended operations after lasting uncertainties over Brexit, London still remains a preferred target for long-term investments. 

Logistics real estate still holds high rank among real estate segments prime for investment due to growth in online commerce. Moreover, last-mile warehouses are in constant deficit due to competition with other segments such as residential real estate, which leads to stability for financial investments. 

Six out of ten of the most promising segments for 2020 are related to residential real estate. It's the first time that affordable housing has entered the top ten of the most influential areas of urban economy. About 61% of real estate specialists are anxious over the affordable housing market, and half of them believe that this issue will be aggravated over the next ten years. 

But the residential sector also faces high political risk. Many specialists refer to upcoming rent controls in Berlin as an example of how political pressure may affect a project's rate of return. Barcelona and London are also developing similar regulations. ULI researchers consider modular construction, financial incentives and public private partnerships to be valid methods for creating affordable housing.

Important factors for investment and development in cities

Investor-Attractive Urban Infrastructure

The forecast reflects the trend that cities are becoming polycentric, and that their peripheries are receiving increasingly developed transport systems. Intelligent transportation solutions should be an integral part of any city (re)development project. Real estate owners seek partnerships with bicycle, electric scooter and car sharing companies, rather than companies selling privately-owned vehicles. Cities and districts also invest a lot in pedestrian mobility, which is good for residents and the environment.

Anna Danchenok,
Real Estate Consulting Leader, PwC Russia

"This year, Moscow has gone down by one place to 31st in the rankings for prospect cities, with Istanbul stepping up. Reasons for this include the impact of sanctions, lack of political stability and currency volatility. At the same time, for Russian investors, the situation remains quite stable and we do not forecast considerable changes for the next few years based on our survey. As for segments, one can note growing investments in the hotels (from 5% up to 24% of total real estate investments) and decline in commercial real estate (from 37% down to 13%). Residential, office and warehouse segments still remain top priority."

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