Schroders shifts attention to western Europe as property gathers strength
Schroders, which runs the JSE-listed Schroder European Real Estate Investment Trust (Sereit), says it is taking advantage of an economic recovery in western Europe with plans to invest in cities such as Berlin, Paris and Amsterdam.
The group said it could get returns on investments in the west that were as good as major cities in eastern Europe, including Warsaw and Bucharest. This was while many SA investors continued to look to central and eastern Europe for growth.
Sereit, which acts as a rand hedge for SA investors, promises consistent income payouts, instead of seeking market-beating capital growth.
“We continue to invest in high-growth cities and we believe that uncertainty around the Brexit process will benefit the capitals of major western European countries and some secondary cities at the expense of London,” said Schroders head of global real estate estate Duncan Owen.
“We are agile and can exit our investments in places like Paris, Berlin and Manchester quite easily. At this point we will invest in these for five to seven years at a time,” he said.
Berlin has become attractive as its GDP growth is 30% higher than Germany’s. With 4.5-million people, Berlin is attracting new businesses and job-seekers at an alarming rate.
“The largest cities by population in western Europe are London, Paris and then Madrid. Madrid has a population of 6.5-million people but I believe Berlin will overtake this in a few years. Berlin is attracting many tech and industrial warehouse tenants, which excites us as investors in a market where e-commerce continues to grow rapidly,” Owen said.
Schroders has also been searching for distribution centres in France, and Sereit acquired a freehold logistics property in Rumilly, southeastern France, earlier in 2018 .
Schroders was not limited to investing in industrial property and would consider offices and other specialised property types too.
“We feel that one should not miss an opportunity to take advantage of what is a strong recovery in western European commercial property. Right now we can get offices in Paris at yields around 5% and lower-quality offices in Warsaw at similar yields, so we remain committed to western Europe,” he said.