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Commercial real estate investment activity up 11% in Q1

Total commercial real estate investment activity totalled EUR32.2bn in Q1 2014, an 11% increase on the same period a year ago, according to DTZ’s latest investment market update for Europe.

This was the highest Q1 volume since 2008 and confirms the continued recovery in Europe’s markets.
Magali Marton, Head of CEMEA Research at DTZ and co-author of the report, says: “The UK remained the most active market in Q1, with EUR11.2bn of transactions recorded, a 38% increase on Q1 2013. The rebound in activity was even more significant (+43% y-o-y) in Germany as volumes reached EUR9.4bn. In comparison the French market posted a modest 8% increase to EUR3.8bn. Outside of the three core markets, the peripheral markets (namely Ireland, Italy and Spain) continued to attract cross border capital flows as investment volume more than doubled in one year to reach EUR2.6bn in Q1 2014.”
There were numerous deals above EUR500m in Q1 2014 totalling EUR4.6bn in value. This helped push the average deal size to EUR32m, above the Q4 2013 average of EUR30m and EUR 28m in the same period a year ago.
Nigel Almond, Head of Strategy Research, adds: “Cross border investment remained strong, representing 43% (EUR13.9bn) of investment in Q1. A strong 30% of all Q1 2014 European investment, or EUR9.6bn, represented inflows from outside of Europe. The most unexpected result was that the highest share of non-European investment for individual countries was recorded by France (47%), CEE (44%) and the peripheral markets (41%). By contrast Germany (27%) and the UK (30%) saw a smaller share. We suspect this might be partially driven by opportunistic fund managers, which have raised significant investment capital.”
Offices accounted for the highest volume in Q1 2014 with EUR14.9bn (46%) invested, although this was down from the quarterly average of EUR17.6bn recorded in 2013. The biggest increase in activity in Q1 was recorded in the mixed use sector, with volumes totalling EUR4.8bn, up from EUR2.2bn in Q1 2013. Mixed use property sales have been strong in the UK (EUR2.3bn) and Germany (EUR1.0bn). Retail investment totalled EUR7.4bn (xx% of investment). Much of this activity (52%) was driven by shopping centre sales which reached EUR3.8bn in Q1.
Kasia Sielewicz, co-author and manager of investor research at DTZ Research, says: “We expect the positive start to the year to continue with increased levels of capital chasing European commercial real estate. As opportunities for prime assets remain scarce and expensive in a number of core markets, we see growing interest in secondary market and assets. Overall this growth will push full year 2014 volumes 5% higher to EUR150bn and EUR160bn for 2015.”

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