Investment in commercial real estates in Austria
In the years 2015-2016, record levels of investments in commercial real estates in Austria have been recorded. The total investment volume was approx. 3.75 Billion EUR, 50% of it were undertaken by foreign investors: 30% of the total investments were undertaken by investors from Germany and more than 10% by those from Russia and the CIS countries. These numbers clearly show an attractiveness of the Austrian market for commercial real estates for foreign investors.
In general, there is a high demand on the part of private and institutional investors for investment projects with the aim of preserving and extending their own funds. Due to a high demand for reliable investment projects, commercial real estates show an appreciation, which is always above the inflation rate (constant rate of 1-2% inflation in the last years).
The highly active demand for commercial real estates on the part of investors can also be traced back to low interest rates in the case of bank financing, a low rate of the EURIBOR and practically zero interest rates for bank deposits.
In general, the main investors in commercial real estates are institutional investors: real estate fund, insurance companies, trusts, etc. Private investors are rather risk averse and thus, prefer investing in less risky financial instruments.
A crucial factor for the increase in the demand for commercial real estates is as well the use of new models for co-investing in big investment projects for structured groups of small and medium-sized private investors as well as legal entities. This financing model requires long-term investments and is characterized by special methods for tax optimisation for investors.
According to statistics, the percentage of contract conclusions in the Austrian segments of commercial real estates are divided as follows: the highest demand is recorded with retail and office spaces.
42% – retail spaces
36% – office spaces
12% – hotels
10% – other types of properties
Factors which influence the attractiveness of investments in commercial properties:
The following factors which influence the liquidity effect, the stability and the prospect of an increase in yield should an investor take notice to when selecting a commercial property:
- The type of commercial property
- The location of the real estate
- The potential development of the location and region regarding the demand from tenants
- Proportion of vacant premises
- Duration and type of the rental agreement
- Indicators for the financial stability of the tenant
- Technical state of the real estate
- Perspective of the construction project or the expansion of the usable area of the real estate regarding the potential rent or purchase
Segments of the commercial real estates in Austria and their potential yields:
We are able to offer our clients and partners investment projects of all possible commercial properties` segments in Austria any time:
- Revenue houses: The segment of revenue houses is considered as highly unattractive as it is seen as a very conservative segment and has a relatively low expected return. The yearly yield varies between 1.5% in the Viennese City Centre and 5% in the peripheral areas or in the provincial cities and villages around Vienna.
- Shopping centres, supermarket chains and retail stores: These segments show a return of 4-6% dependent on the type of the sale opportunities, location, the financial stability of the tenant`s and the duration of the rental agreement.
- Hotels: The yearly return is around 2-6%. The yield of a hotel depends on its location and the type of the agreement with the operator: Rental or Management agreement. The most secure rental agreements for investors are those with international hotel operators. The return of hotels which are located in the Centre of large cities reach 5.5-6% at a maximum. Hotels which are located in the historical centre of Vienna have a yearly yield of 2-4%.
- Office buildings: 3-6% yearly yield. Office spaces in the centre of Vienna have a relatively low return. Those office buildings which have only one or two anchor tenants are less risky due to long-lasting rental agreements with waiver of termination. More risky and of course more profitable are those office buildings with a higher number of small and middle-sized tenants.
- Logistical centres and business parks: 6-8% yearly yield. Logistical centres are usually located around grater villages or at crossroads of arteries. Least risky are those logistical centres which are located near a large city.
- Woodland and hunting ground: 1-2% yearly yield. This segment is also rather conservative and is being bought usually by Austrian wealthy families and trusts. The acquisition of such territories is generally associated with investors` private interest in hunting. The return of woodland is determined by current prices for the type of wood which grows there.
- Properties and development projects: the yearly return is up to 25% possible. Such projects assume a developments of the territory, the construction of a building, its management and its sale.