The final quarter of 2019 saw European office transactions reach a record high, surpassing the previous record by a staggering 30%. Six months on, clearly the market is in a very different place. Inevitably transactions in 2Q20 will fall significantly in most markets. But the key question is whether the liquidity that was recorded prior to the crisis will return in 3Q20 and beyond and how will this affect office pricing when transactions start to normalize?
So far, the anecdotal evidence has been relatively encouraging for a rebound in activity. After the initial lockdowns started, deal flow almost dried up completely. But over the past two months, an increasing number of assets have been brought forward for sale. The types of assets which are coming forward are generally those where the vendor has a good indication that they can achieve a price which is not far off pre COVID-19 levels. So most of the assets coming to market are in the core locations, with a good length of income to robust tenants, both factors of which largely reflect investors’ appetite for risk at the moment i.e. not much at all.
Source : UBS Asset Management