Savills has a shred of good news on the resilience of European cities' commercial property sectors, given all that is going on. Figures suggest that the demise of the office has been greatly exaggerated.

Using data culled from 27 European cities across nine different metrics, from liquidity to how cities are handling the crisis, Savills ranked London, Paris, Berlin, Stockholm and Frankfurt the top five most resilient cities and said many cities are showing good staying power.

Despite investment volume being down by around 40 per cent in the second quarter year on, Savills expects activity will pick up strongly in line with lockdown liftings, reviving economic activity, and flights reopening. The report came with numerous health warnings on the unpredictable nature of containing this pandemic, but forecast investment volume to fall between €125 billion and €170 billion overall in Europe for 2020 (a drop of 34 per cent to 54 per cent year-on-year).

Economic resilience
Markets that imposed looser lockdowns, are less dependent on hospitality and retail, and normally register above-average growth, are better placed to attract investment, the report said.

The study found Germany, France, and the UK, as Europe's biggest economies, already attracting a larger share of real estate investment for Q1 2020, taking 73 per cent of transactions between them, up from 63 per cent in the first quarter the year before. The broker said it expects this trend to continue throughout 2020.

Despite wishful thinking on the part of commuters that COVID has killed the office, Savills sees offices remaining “the predominant workplace for quite some time.”

Commercial office space makes up the lion’s share of the overall property investment market and dominates within the real estate asset class for investors. Commercial property is an important allocation for institutional portfolios and Savills believes that a liquid market will carry on attracting strong investor interest.

Scoring London top for resilience, the property group said: “We expect the British capital to keep catching investors’ attention. The market is heavily dependent on cross-border money, however most international funds traditionally looking into Europe have an office based in London." It also sees the London market bouncing back quickly, "especially as it was attractively priced before the pandemic.”

Paris ranked the second most liquid market. As cities are partially scored on how quickly they recovered from the 2008 financial crisis, the French capital was seen as taking longer than its peers. “We expect this time will be different due to the intrinsic characteristics of the Parisian investment market: historically led by domestic investors with a very large share of office investments,” the report said.

Stockholm, Gothenburg and Oslo, although not highly liquid compared with Europe's core cities, also bounced back quickly with investors after 2008. The report noted that these regions rely a lot more on domestic demand and between Nordic neighbours; but added that liquid multifamily markets in the Nordics are helping the smaller centres remain resilient.

Brussels and Gothenburg are also expected to fair better than other European cities based on retail, tourism and GDP foreacasts for the next three years. Again, any forecasting in the current climate is taken with a pinch of salt.

Berlin, Frankfurt, Amsterdam, Hamburg, Dusseldorf and Rotterdam also scored well as liquid markets with historically strong office and multifamily markets. All six recovered relatively quickly from the previous economic crisis, but the report warned that around half of their annual investment turnover is reliant on foreign capital.