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Europe real estate boom: Brad Pitt invests in Croatia; huge REDI project in Helsinki

The REDI mixed-use project in Helsinki

Amid the noise about the “collapse” of Europe, you might have missed a big story: Europe’s commercial real estate sector is booming.

The financial press, which has the facts to counter the Fake News channels, states that European cities such as Oslo, London, Helsinki, Copenhagen and Stockholm are the cities where institutional and global investors want to deploy their capital, attractive due to legal transparency, stability and sustainability.

With the recent defeat of ultra-nationalist Geert Wilders in the Netherlands, it looks like investor optimism will rise across Europe. Though not necessarily in the post-Brexit United Kingdom.

As difficult as it is to believe, Europe is fairly under-developed, with total retail square feet per capita in the United States more than six times that of Europe.

Yes, there have been terror attacks and there will likely be more. But that hasn’t stopped retailers, developers and movie stars from pouring billions into giant projects from Croatia to Finland.

Who cares? Well, we do. As an expat-focused company, we think it’s important to understand the true dynamics of capital in Europe, and all the opportunities the continent offers.

London-based commercial real estate giant CBRE just released its 2017 Investors Intentions Survey, and London and Berlin are the most attractive cities for investors in that order. Other hot spots are Madrid, Amsterdam and Paris, again in that order. Also in the Top 10 are Warsaw, Prague, Stockholm, Munich and Frankfurt, in no particular order. Germany tops the United Kingdom in the most attractive countries for investments.

Cushman & Wakefield forecasts that 18 million square feet of new retail space will be completed in western Europe from now through 2018, while Central Europe and Eastern Europe are on track to add 28 million square feet.

To get into the game, London-based Savills Investment Management is raising 500 million euros for a European retail fund focused on acquiring and reviving large undercapitalized or poorly managed shopping centers and outlet centers in high-traffic major cities including in the Nordic countries.

To some extent, much of the boom is driven by tourism, which was flat after the Great Recession and is only now recovering. But with interest rates at historic lows, more and more capital at increasingly favorable terms is available for hotel projects.

In 2016, 40,000 new hotel rooms opened in Europe, with 69,000 currently under construction or planned, according to industry publications. The value of the projects is projected to be 23 billion euros this year, up from 20 billion for all of 2016.

So, cue the movie star ….

Croatia is where the action is

57d0bb2170d11_5_1bt1eop-1bt1ep1Sexy always leads, so let’s get to the big news that Brad Pitt is investing in a 1.5 billion euro luxury complex in Croatia that includes residences, hotel, villas, restaurants, golf and other stuff, according to Conde-Nast Traveler and multiple news sites in Croatia.

The development, set in the coastal town of Zablace will be “a modern ecologically-responsible planned community.” Swiss-based fund TFI Holdings has put up $70 million in the project, but it’s not clear how much skin Pitt will have in the game.

In addition, Croatian news sites report 2 billion euros in plans on the drawing board including:

• A new 5-star hotel complex in Dubrovnik. The Hotel Plat complex – currently made up of one 3-star hotel and seven villas – will be redeveloped as a 5-star hotel, project valued at about  $70 million.

• A new hotel group, Stories, will unite 16 luxury hotels in Dubrovnik and other resort towns into a single brand, according to a news release. The hotels include The Adriana Hvar Spa; the Hotel Adriatic Rovinj; Hotel Bastion, Zadar; Bevanda, Opatija; Kazbek Boutique Hotel, Dubrovnik; Life Palace, Šibenik and Design Hotel Navis in Opatija.

Travelodge announces mega London project, its largest hotel

Screen Shot 2017-03-21 at 11.12.19 AMThis is hot off social media: Executives at Morristown, NJ-based budget travel giant Travelodge just announced the company is building a huge hotel in London, where real estate is not exactly cheap. In fact, it will be the chain’s largest property.

Travelodge execs announced the 395-room hotel on Twitter, so there aren’t a lot of details. We’re guessing this would be what Americans term a “triple-net leaseback” where the developer builds the building, then the tenant agrees to lease it at a somewhat discounted price and pay all costs and taxes.

It costs about 2,500 pounds per meter square to build in London, so we’re estimating this deal to be worth somewhere around 50 million pounds calculated at each room being 20m2.

The London hotel is just one of 15 Travelodge locations planned across the United Kingdom this year.

Bricks-and-mortar stores still have a future in Europe

At the same time e-commerce is crushing malls in the U.S., which are filling former apparel spaces and department stores with groceries, Europe is adding retail.

Drapers Property Report has the best overview of what’s going on in Europe, and it’s immense, with new shopping projects from Portugal to Switzerland to Finland.

The most interesting project by far Drapers lists is the “experimental” REDI mixed-use development in Helsinki, a 500 million euro project:

Set to open in autumn 2018, the 645,835 sq ft Redi development in Finland is being billed as the most experiential shopping centre in Helsinki. It will feature 200 stores, including supermarkets and other retailers, 38 cafes and restaurants, a climbing wall, a flying centre and a simulator ride by Australian company 7D Cinema. It is expected to attract 12 million visitors in its first full year, rising to 17 million annually by 2027.

The REDI project includes 1,500 apartments in eight residential towers.

These are just the latest projects.

See our post from last year about even bigger projects in Austria, Denmark and Germany.

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