In Q2 2013, €25 billion was invested in European commercial property, taking the total for H1 2013 to €53.7 billion, a 4% increase on the same period last year. Source: Real Capital Analytics/Knight Frank data.
Although demand for assets in primary markets remains at a high for H1 2013, the number of investors in areas outside core markets is increasing as they search for higher yields in secondary cities due to the easing Eurozone debt crisis.
In H1 2013, the UK, France and Germany accounted for 64% of all investments in Europe. This brought investments in the UK up by 11% on last year, Germany up by 24%, but France investments down by 20%. These are typically the 3 largest markets in Europe. Despite this activity, London and Paris still remain dominantly in demand for international investors entering Europe.
Investment volumes also increased on last year in Spain by 102%, Italy by 113% and Ireland by 182%, although, all three countries were recovering from poor investment activity in 2012. The Spanish investments in H1 2013 of €1.1 billion were contributed to by AXA’s €172 million purchase of a portfolio of offices in Barcelona, their first acquisition in Spain since the onset of the financial crisis. From this, the return of investors to the Spanish market is largely evident.
A major urban regeneration project in Milan included the acquisition of a 40% stake in Porta Nuova by the Qatar Investment Authority, boosting Italy‘s investments in H1 2013. This project is valued at over €2 billion. The investment was one of several major deals during this period involving Middle Eastern or Asian buyers. In recent years, Middle Eastern and Asian buyers have been investing largely in the London and Paris markets, but are now taking chances on landmark schemes in other European capitals and stronger regional cities. Major investments to note in H1 2013 are the Chinese sovereign wealth fund, Gingko Tree’s investment in a share in the Co-op headquarters in Manchester in Q1, and the purchase of the BelAir project in Brussels in Q2 by an undisclosed Asian investor, as part of a joint venture.
Europe’s 2012 total investment level of €118.7 billion is set to be matched by end 2013, suggesting the slow but continued emergence from Europe’s recession which will also boost demand for further investors. Following recent downward price corrections, activity in peripheral countries should also be encouraged by the stabilisation of yields in these markets.
European investment volumes (€ billion):