European commercial property investment up 7.9 per cent on previous quarter
Commercial property investment markets proved quite resilient in the second quarter, with volumes totalling EUR29.2bn, 7.9 per cent up on quarter one.
Year on year volumes also rose marginally, by 0.6 per cent, to EUR124.6bn. However this is 19.4 per cent down on the average of the previous five years and first half volumes were 17.7 per cent down on the latter half of 2011.
Foreign investors were the key driver of the market, increasing activity by 48.3 per cent on Q1 and taking their market share to 48 per cent from 35 per cent last year.
Domestic investors by contrast have grown more cautious, cutting investment by 13.7 per cent on an already weak first quarter.
Michael Rhydderch, head of capital markets at Cushman &Wakefield, EMEA, says: “Market activity was more robust than expected in the second quarter but the shadow of the euro zone debt crisis is clearly falling across the market. Even some previously committed investors are choosing to step back to wait to see what will happen but it’s clear that we have more than just the sovereign debt crisis shaping what is happening – activity is also being hit by the disarray in much of the banking sector, not to mention uncertainty in the wider economic and employment picture.”
Offices have been the strongest performing sector of late, in fact seeing their best Q2 volumes since 2007, with activity rising 19.8 per cent on Q1 to EUR16.5bn, 57 per cent of the total market. Industrial market activity also improved, with a 21 per cent increase taking the sector’s market share to 8.5 per cent. This was on the back of a weak Q1 however and volumes are still 14 per cent down on the five year average.
Retail market activity meanwhile has been a victim of the increased caution being seen in the market as well as a shortage of finance for a larger lots and a focus on only the best. Retail volumes overall fell by 5.9 per cent, giving the sector a 19.9 per cent share for the quarter versus a recent high of over 40 per cent (Q1 2011). Sector patterns are far from uniform market by market however, with retail up in Germany, France and Sweden for example but offices ahead in the UK, France, Russia, Denmark and Switzerland.
David Hutchings, head of European research at Cushman & Wakefield, says: “For all the headlines on the euro zone crisis hitting the indebted southern fringe, the pattern of who’s winning and who’s losing for property investment is less clear cut. For sure the peripheral markets of the south are out of favour with many – but their market share actually rose modestly in the second quarter, from 4.3 per cent to 5.0 per cent, thanks to a 26 per cent increase in activity, driven by Italy and its hospitality sector in particular.
“This has also been reliant on just a few large deals which may not be repeated of course and the region is also still a long way down on recent history – with the south averaging a market share of 8.3 per cent in the past 5 years - but it is still better than some other regions, with Central Europe and Benelux seeing their market shares fall in the past quarter.”
Overall, core markets continue to attract most investment, with the UK, France and Germany seeing 60 per cent of all activity in the first half of the year, modestly down on the 62 per cent seen in 2011. However, while the big three saw volumes rise 12.3 per cent thanks to a strong increase in France, the Nordics have been the biggest winners – pushing up to an 18 per cent market share, ahead of Germany for the first time since 2008. At the other end of the risk spectrum, Eastern Europe also saw a strong rise and took a near seven per cent market share, with Russia the powerhouse behind those figures.
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