By Robin Trehan,( B.A, MIB, MBA) Partner at Transatlantic Funds
In today’s global economy investors may have trouble figuring out which country will afford them the best investment opportunity and which investment is right. Much of that question can be answered by looking at the demographics of other countries, including age of the workforce, population growth, average age overall. Let’s take a look at Europe.
Germany, once an industrial giant, has been seen increasingly outsourcing these industries to Eastern Europe. In the advent of the fall of the Soviet Union, a system under which everyone of working age had a job, former Soviet Bloc countries are experiencing stunningly high unemployment rates. Yet their workforce is skilled. German companies, which had very liberal benefits packages for their workers, have moved their operations to Eastern Europe where the labor is cheap enabling these countries to maintain their competitiveness in the global marketplace.
France is one of the only countries in Continental Europe with a steadily growing population. This is attributed to the high numbers of Muslims living there, who are one of the only groups increasing in numbers. US investors think about France as a second especially with France outburst and opposition to US foreign on many fronts.
Second to France is Great Britain’s population is expected to continue to grow through 2050 which makes them a likely candidate for real estate growth. While elsewhere in Europe, with the exception of France, most real estate sectors will be involved in “replacement markets”, replacing buildings damaged or destroyed.
Italy’s growth has peaked and is now in decline. Their workforce is shrinking and their population aging. But don’t write off Italy entirely. The market in Italy could turn to extended care facilities and senior homes or communities. As the population ages and the average life span increases, demand for these markets will undoubtedly increase.
Spain faces problems similar to Italy. Their population is expected to peak in 14 years and then begin the slow decline until they too, are simply a replacement market.
These trends could change if the countries with flat growth loosen their immigration laws ,in a better and more diversified manner, which is being considered in several countries. Though this will help, it will not immediately reverse the trend. The investments that will be affected first will be those in office buildings. Vacancy rates continue to increase, particularly in Germany. Instead of raising rents, landlords are offering reductions if tenants sign 5-year leases. Traditionally Germany is the harbinger of the rest of Europe so their experience should be taken into account when any investments considered in other parts of the continent.