Continued strong activity in central London was the main driver of a 15% increase in commercial real estate investment volumes in Europe in Q3 2012, according to CBRE Group, Inc. (CBRE). During the period, investment transactions totaled 28.4 billion, compared with 24.7 billion in Q2 2012. This volume is almost back to that seen in Q3 2011, which totaled 28.6 billion.
By far the strongest trend was evident in the UK, which saw 11.9 billion of transactions completed during the quarter, an increase of 40% on Q2 2012 as well as Q3 2011. A number of larger transactions that were expected to complete in Q2 were instead completed in early Q3, which exaggerated the quarter-on-quarter change. However, the quarterly increase in activity still was substantial.
The UK also dominated regional activity, accounting for 42% of European investment for the quarter. This was driven by the continued attraction of London as an investment destination, with the city accounting for 73% of transactions in the UK so far this year.
Europe's second largest market Germany also saw a significant quarter-on-quarter increase in investment. Total activity for the quarter was 5.1 billion, an increase of 19% on Q2 2012, reversing a short-term dip in activity in Q2. France saw a Q3-on-Q2 decline in activity. This decrease was expected as the volumes for Q2 2012 were boosted by two large sales from a German open-ended fund that is being liquidated. At 3.3 billion, France's Q3 2012 activity was 9% below the level recorded in Q3 last year.
Jonathan Hull, Head of EMEA Capital Markets, CBRE, commented:
"The London market is proving to be highly resilient, and continues to be sought out by investors from around the world. International buyers have been dominant over the last twelve months and it is fair to say that they are making the market for major central London offices. The profile of investors who are active at the moment suggests that London is considered a safe haven due to the market's liquidity and position outside the Eurozone.
"What clearly shows through is the focus of investors on prime property and risk avoidance. This is behind the activity in central London, the renewed strength of the German market and the limited activity in Southern Europe. It is also a factor in the type of product that is changing hands, with turnover being dominated by transactions involving large, well let, well located buildings.
"Across the region, however, transactions are taking longer to complete, impacting on overall market activity. Nevertheless, we expect European investment volumes for 2012 as a whole to be just slightly less than 2011."
Valentin Gavrilov, Director of Research department, CBRE, Russia, said:
"In Q3 Russia accounted for around 80% of the total investments in CEE. By the end of 2012 we expect investments in Russian commercial real estate to slightly exceed pre-crisis levels. Remarkably, European investment turnover is still significantly below its historical volumes of 2007.
Interest to Russian CRE is driven mostly by the national investors, but we do register a significant interest from the foreign investors, as well. In addition to landmark 'Galeria' transaction we hope to see another USD 1+ bln. deal, done by the foreign investor, in the nearest future. Unlike London, Russia is not a safe haven, but, nonetheless, its popularity, as an investment destination, steadily restores".