European direct real estate investment volumes bounced back strongly in Q4, says Colliers

European investment volumes witnessed a strong bounce back in Q4 2020, with key markets witnessing improving liquidity and the return of global capital, notes Colliers in its latest European Capital Markets report.

Investment into direct European real estate reached EUR252 billion for the full year, a 25 per cent fall on 2019, but the figure masks a range of different performances across countries. In Denmark, volumes were up 20 per cent year on year, whereas Germany hit EUR59.2 billion representing the third highest end-of-year result in the past ten years. The UK volumes were down by only 20 per cent.

Richard Divall, Head of Cross Border Capital Markets, EMEA at Colliers, says: “Momentum in Q4 2020 was driven by the industrial and logistics sector with several national and pan-European portfolios attracting strong demand from Chinese and North American capital sources. We also saw investors adopt different strategies to increase their allocations to the highly desirable I&L sector including M&A, recapitalisation of existing portfolios and the formation of strategic partnerships.”

Pricing for core offices with stable income remains resilient and investor demand for long secure income is attracting a premium in key markets according to the firm. Meanwhile, investors continue to build up their allocations to the living sector with strong demand for the forward funding of portfolios at a national level in the UK, Nordics, Benelux and Germany. Activity is growing in markets with rising demand in particular in Spain, Italy & CEE.

Divall: “This year we expect there to be significant interest in the alternative sectors including life sciences, senior living and assets backed by technology sub-sectors, all of which are poised to play a larger role in institutional investor portfolios. Last year saw AXA acquire Kadans, a leading owner and operator of science parks and laboratories in Europe, and these types of assets could generate outperformance relative to traditional real estate property types in the year ahead.

“Investors have adopted a cautious but confident approach in Q1 2021, despite lockdowns limiting transactions. We expect cross-border investment to rise this year as the vaccine is rolled out, allowing a relaxation of travel bans and quarantine measures.”

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