The study, published by Urban Land Institute (ULI) and PwC, found that the intense competition for prime assets in Europe’s major real estate markets is leading investors to turn to recovering markets such as Ireland, regional cities and secondary properties in search of returns.

“Europe’s economy is recovering, and political uncertainty over its future is declining. The real estate industry is staying cautious as ‘safety first’ remains the mantra, but risk is no longer a duty word,” says Amaury Evrard, partner, Real Estate & Infrastructure Leader at PwC Luxembourg. “Equity is flowing in, and debt is getting easier to find though how much easier depends on where you are and what you need it for.”

Thierry Braem, partner at PwC Luxembourg, adds: “Allocations to prime real estate from European debt providers and equity investors are expected to continue to rise in a sustained, albeit gradual, opening-up of capital markets over the course of 2014. The funding gap is shrinking, and will continue to do so, mainly due to the arrival of specialist funds and insurers’ strategic expansion into debt finance. CMBS could also play a role, as there are signs indicating they could re-emerge as a source of debt in Europe.”

In Luxembourg, the Real Estate market is expected to maintain or even pick up pace compared to 2013. 

John Ravoisin, partner, Real Estate Advisory Leader at PwC Luxembourg: “We foresee a renewed boost in interest in less core or peripheral assets. Demand for core assets has overheated these last years and their prices have reached such high levels that a significant number of investors cannot afford them anymore. They could therefore see these alternative assets as investment opportunities. As it stands, rents are expected to continue their slow increase while yields are predicted to keep stagnating, especially for prime/core assets.”

Even though many large players are moving onto new premises in 2014, vacancies should continue to decrease slowly. This will also create redevelopment opportunities.

Laurent Rouach, partner, Sustainability Leader at PwC Luxembourg, notes: “Sustainability is expected to remain high on the Real Estate industry’s agenda. We foresee the vast majority of large commercial Real Estate buildings completed in 2014 in Luxembourg to be certified. As certification schemes have evolved to include more operational aspects, we expect “in-use” certification to follow the same trend in the medium term. This will also enable the certified companies to highlight and promote their CSR initiatives.”

All in all, investment volumes are to remain stable or to slightly increase compared to 2013.