Real estate investment in Europe enjoys record first quarter

Total real estate investment in Europe reached EUR85.5 billion in Q1 2020, representing a 52 per cent increase on the same period last year, according to the data from global real estate adviser, CBRE. 

This represents record Q1 performance for European commercial real estate, surpassing the previous high seen in Q1 2015.

Preliminary investment volumes in the UK in Q1 2020 totalled EUR17.2 billion, up 33 per cent on the same period last year due to greater political stability following the parliamentary election results in December 2019. UK investment volumes in Q1 2019 were suppressed due to heightened uncertainty ahead of an agreement on the terms under which the UK would leave the EU.

Many of the major continental European markets also outperformed the first quarter of last year, with Germany, France, and Spain recording investment volume increases of 97 per cent, 38 per cent and 54 per cent respectively. Performance across the major markets was driven by two exceptionally large platform deals in Germany, accounting for EUR10 billion alone, and the GBP4.7 billion purchase of the IQ student housing platform by Blackstone in the UK.

Additionally, investment volumes in Ireland were up 110 per cent on Q1 2019, reaching EUR1.3 billion, with offices and multifamily in Dublin recording particularly strong performances.  Italy saw volumes increase by 5 per cent to EUR1.8 billion, driven by strong performances in industrial and logistics, and retail (high street, mixed, and supermarket), while the Nordics also performed well, with Sweden recording a 97 per cent increase on the same period last year due to the completion of the EUR3.1 billion Hemfosa/SBB transaction. Central and Eastern Europe also had a strong quarter relative to the previous year driven by an increase in investment in Poland and the Czech Republic. Other markets that showed a significant increase are Portugal, Belgium, and Luxembourg.

The strong performance in Q1 2020 in Europe was driven in part by a lag effect from the previous quarter, with many large deals that were initiated in the latter part of last year, completing at the start of this year. However, correcting for the large platform deals, investment volumes in Q1 2020 were still up 15 per cent compared to the same period last year, equating to the 3rd strongest first quarter on record. 

Whilst these volumes are not reflective of current market sentiment, and it won’t be until Q2 that the impact of Covid-19 on the European investment market will be seen, the strong performance in Q1 2020 is indicative of the amount of capital available to invest into European real estate and gives confidence investment volumes will regain strength once Covid-19 uncertainty fades. 

Chris Brett, head of EMEA capital markets at CBRE, comments: “The record Q1 performance we have seen across Europe serves to highlight how strong the appetite is from global investors for real estate assets. Since March of this year, we have seen a marked shift in sentiment due to the outbreak of Covid-19 and its widespread impact on communities, businesses, and the economy across Europe. The true impact of this will not be seen until Q2, however, we expect the repercussions to be significant in the short term, with positivity and opportunity emerging in the mid to long-term as the industry begins its recovery. Real estate fundamentals enter this period of uncertainty in good shape and it will continue to perform well on a relative basis in the long term.”