London commercial properties rated HOT

Office and retail properties in London offer the most attractive investment opportunities in the European property market, according to a report by international real estate consultancy firm DTZ.

London city and London West end were rated as “hot” markets in the office and retail segments with a 12 percent and 9 percent undervaluation in prices, according to DTZ.

"London City offices remain one of the most attractively priced markets when size and liquidity are considered. Strong rental growth over the medium term driven by a rapid recovery from the crisis combined with short supply will provide solid capital value growth and consequently attract solid return for investors," said the report.
 
Other attractive office markets include Paris CBD, undervalued by 3 percent, Milan and Frankfurt, which were undervalued by 1 percent and Madrid, which was overvalued by 3 percent.

In the retail sector, Milan, Paris, Munich and Barcelona were among the top areas. “In the retail sector, investors are currently able to purchase strong future rental growth in both London West End and Milan. London West End has held up well during the downturn and is forecast to deliver stronger growth while Milan is set to deliver a solid rebound after falling significantly,” said the report.

In the industrial market, the top areas include Antwerp, Hamburg, Rotterdam, Warsaw and London Heathrow.

DTZ said the industrial market was less volatile during the downtrend. It added that Antwerp posted high yields while Hamburg presented high returns in spite of dampened prospects for rental growth.

Based on DTZ’s methodology, “hot” markets are estimated to be underpriced by more than 5 percent, while “cold” markets are overpriced by over 5 percent. Markets rated as “warm” are valued in between “hot” and “cold”.