MIPIM 2023 Digital Edition

Investing in Austria
Influence of interest
rate turnaround on the
investment market
Increasing investor enthusiasm. After a solid performance in the previous year despite many challenges,
experts expect more momentum on the Austrian real estate investment market in 2023.
T
he Austrian real estate investment
market has had busier times in the
past compared to 2022. Given the
turnaround in interest rates - not
to mention inflation, high commodity prices,
economic weakness, supply chain problems
and war in Ukraine - the transaction volume
of just over four billion Euros, which is around
ten percent down from the previous year but
still in line with the ten-year average, it is still
pretty respectable particularly because some
forecasts had assumed a significantly worse
result as a whole.
It is undoubtedly a good sign that the market
has gained further momentum in the fourth
quarter. And as the experts at EHL Investment
report, there is currently significantly more
interest in investments than in the fall of 2022.
However, the price expectations of potential
buyers and sellers are still too far apart for
deals to be concluded. „Experience shows that
it takes around half a year for a new market
equilibrium to form, so we expect a significant
increase in transaction activity again from the
middle of the year,“ said Franz Pöltl, managing
partner of EHL Investment Consulting.
Repricing continues in
the first half of the year
CBRE also expects the ongoing repricing
process on the Austrian real estate market
to continue, at least in the first half of the
year. According to Lukas Schwarz, Head of
Investment Properties, review processes and
acquisitions are currently taking longer, and
a clear focus by investors on good and convincing
assets can also be discerned. „In addition
to location and tenant structure, for example,
ESG criteria play a particularly significant role,“
he added. Furthermore, „Properties that do not
meet these requirements are not shortlisted by
investors or are only sold at large discounts.“
„Properties in weaker locations, with difficult
leasing situations or a greater need for action
concerning ESG goals, will trade at lower
prices,“ Pöltl also says. In the case of top properties,
where indexation of rents can also be
enforced, the inflation protection that real
estate is known to offer will once again attract
greater attention, he adds. „For these properties,
the price adjustment will also be limited,“
the EHL investment head maintains.
„Whether there will be a revival in transaction
activity from the third quarter onwards depends,
particularly in the residential segment, on whether
prices can adjust to the changed interest
rate level,“ believes Christoph Lukaschek, Head
of Investment at Otto Immobilien. The emphasis
here is on residential real estate. With a
share of more than 30 percent of the transaction
volume, this asset class was number one in 2022,
as in previous years. According to Lukaschek,
this was primarily due to several large-volume
sales. Office (20 percent), logistics (15 percent)
and retail (10 percent) came in second.
Further price adjustments
Where are prices headed? The restrictive
lending regulations by banks, combined with
rising SWAP rates in all asset classes, negatively
impact price development, according
to EHL. This is reflected not only in higher
interest rates but also in higher capital requirements
and risk margins. In many cases, this
leads to price adjustments.
According to the experts at CBRE, the fact
that prime yields in Austria were corrected
upward by an average of 70 basis points in
2022 - overall, office and residential buildings
were affected the most with an adjustment of
75 basis points - can even be considered moderate
compared with other Western European
countries. Further corrections are expected for
2023, although they should be less drastic. At
any rate, the prime yield in the residential segment
is currently around 3.50 percent, while
it is just under four percent in the office segment.
Significantly more is to be earned with
top logistics real estate, namely 4.5 percent.
This is only topped by shopping centers (5.25
percent) and retail parks with five percent.
Austrians dominate
Last year, Austrians were the most active players
on the investment market, accounting for
almost 70 percent of the transaction volume.
Germans accounted for 26 percent, followed
by international investors with five percent.
Overall, it was primarily special funds, project
42 ImmoFokus