Private equity dominates high-yield
Private equity firms have spent 58% of their capital on non-CBD offices so far this year: retail warehouses and shopping centres are a distant second and third, with around a 12% share each. If current trends continue, this investment sector will be the leading source of capital for high-yield investment in 2020.
Investors seem to prefer higher-risk office purchases to higher-risk retail, as office risk factors tend to be easier to manage. Non-CBD (Central Business District) offices remain the most likely targets – though faltering retail assets should also provide good opportunities for investors looking to repurpose or redevelop.
Location is key
The UK will continue to be the largest source of high-yield deals, but investors will increasingly look further afield in Europe, with the Saxon Triangle and northern Germany becoming top picks. As high yields have become harder to find in Germany and France, there has also been a steady increase in investment activity in The Netherlands, as well as more sporadic investment in Italy and Spain.