London and Manchester appear cheap, even compared with respective pre-Global Financial Crisis (GFC) prime yields, while falling Portuguese and Norwegian bond yields over the last 6-12 months are increasing the appeal of office investments, says the international real estate advisor.  

Mike Barnes, Associate European Research, Savills, says: “The majority of European office markets appear fairly priced at end Q2 2020, despite more limited rental growth prospects, but there are opportunities to be had for those willing to look to the Nordics, Portugal and the UK.

Record low sovereign bond yields in Europe and beyond will continue to maintain prime offices’ investor appeal, as multi-asset managers seek to increase their exposure to real estate.”

Tris Larder, Joint Head of Savills Regional Investment Advisory EMEA, says: “Investors will be paying particular attention to the liquidity risk premium associated with each office market. Despite the constraints due to tighter lending criteria, liquidity of global capital remains high and is mostly in search of safe havens amidst the uncertainty caused by the Covid-19 pandemic.

Core European cities including London, Paris and Frankfurt stand out as the most transacted office markets over the last ten years and will pique investor interest.”

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*Savills European Office Value Analysis adopts a pan-European view into the relative attractiveness of office pricing based on macro fundamentals and does not cover local market drivers e.g. vacancy rates.