European property investment has best year since start of crisis
Europe had its best quarter for commercial real estate investment since the global financial crisis in the final three months of 2013, according to analysis by research firm Real Capital Analytics (RCA).
A surge of transactions in the continent’s peripheral and emerging markets helped boost total property deals to EUR60.1bn in the fourth quarter of last year, a 52 per cent increase from a year earlier.
The strong quarterly figures lifted investment volumes to EUR177.8bn for 2013 as a whole, or 17 per cent more than the previous year.
Simon Mallinson, RCA’s managing director for EMEA, says: “As concerns about the break-up of the Eurozone abated, this stoked a significant pick-up in interest from investors across the globe looking to snap up assets outside Europe’s core markets at attractive prices. The acceleration in Q4 that we saw in Europe is in marked contrast with the slowdown in transactions experienced in the Americas and the Asia-Pacific region.”
Transaction volumes in Greece, Ireland, Italy and Spain all jumped by more than 80 per cent in 2013 from a low base, while RCA data show that investment in Central Europe and Eastern European markets, like Turkey and Russia, also rebounded strongly. Investor appetite for the Nordic and Swiss markets, which acted as safe havens during the financial crisis and subsequent Eurozone turmoil, diminished markedly in 2013.
France stood out among core western European real estate markets with a seven per cent drop in investment volumes last year to EUR18.4bn, a trend that accelerated notably in the fourth quarter. Paris, Europe’s number two investment destination after London, suffered a 15 per cent slide in investment volumes to EUR12.2bn led by a drop in deals for offices and retail-related properties.
Joseph Kelly, RCA’s head of EMEA research, says: “This is the second year of deteriorating volumes for Paris office investment, which had performed relatively well during the global financial crisis. France sticks out compared with the buoyant core western European markets of Germany and the UK, indicating that economic, fiscal and political uncertainty deterred investment there in 2013.”
RCA analysis shows that investors started to acquire prime assets in secondary markets in Germany and the UK, which both registered strong transaction volumes as the largest national real estate investment markets in Europe.
Mallinson says: “The gap in pricing between prime and secondary office markets in Europe is closing and we expect this trend to continue in 2014 as investors seek higher-yielding assets. The general picture of improved pricing in Europe is broadly supportive for the efforts of banks to slim their balance sheets by divesting property loan portfolios or through disposals of direct real estate owned properties. This is symptomatic of Europe’s real estate markets gradually normalising and suggests that we can anticipate further improvement in investment volumes this year.”
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