Georg Fichtinger - CBRE

CBRE

Georg Fichtinger, head of investment properties at CBRE.

Lack of suitable product in Austria contributes to downturn

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The Austrian investment market was never likely to better the year 2019, which saw an all-time record of €6.3bn transacted. And with the impact of COVID in 2020, the amount actually achieved - €3.3bn – is being viewed in the Austrian market as respectable enough.

Property adviser CBRE in Vienna is actually of the view that Brexit was only partly to blame for the practical halving of the market’s volume. In their view, a lack of suitable product also played a major role. While this shortage is unlikely to disappear in the next couple of years, they nonetheless are predicting a notable upturn this year.

According to CBRE’s head of investment properties, Georg Fichtinger, demand remains high, but new office completions will be limited. The new realities of COVID are affecting demand, along with the inevitable higher standards of assets meeting stringent sustainability and ESG criteria, he says.

Residential properties were the most in demand in 2020, surpassing office. Last year saw a peak in residential completions in Vienna, albeit with the numbers set to fall in 2021, to about 17,000 new units. A report from Bank Austria put Austria’s housing construction industry as one of Europe’s highest growth sectors last year.

At the luxury end of the market, demand remains strong, particularly in the Alps and the lakes regions, as people assess their home-office opportunities in a new light. Kitzbühel, with its proximity to Munich, is much in demand, along with the lake areas of Carynthia and Salzburg, with their obvious advantages for second homes.

Although yields for both office and residential continue to fall, rents so far are remaining stable, said CBRE’s CEO Andreas Ridder.

Austria’s Housing Price Index increased to an all-time high of 139.23 points. This put Austria among the best-performing property markets in the EU, along with Germany, Luxembourg, Sweden, Portugal and Malta, which all registered above average price growth.  By contrast, countries like Finland, Spain and France all saw below-average increases.

Also in heavy demand in Austria was logistics, with many investors coming away empty-handed because of lack of suitable assets. Still, there was more speculative logistics space built than for owner-occupiers than in the previous year.

Not surprisingly, the situation is gloomy in the retail and hospitality sectors, particularly for a country in which tourism plays such a significant role. Up to a quarter of small and medium-sized business are expected to file for insolvency this year as a result of the repeated lockdowns. Prime rents in retail are already falling, by an estimated 7-8%. In the hotel sector, more assets in the pipeline are being prepped for conversion to other uses, with the figure for 2023 already at a whopping 50%.