Improved investor confidence and lending conditions, as well as notably increased activity from opportunistic investors in recovering markets, led to a strong start for the European commercial real estate market in 2014, according to the latest research from global property advisor CBRE.
Total commercial real estate investment in Europe reached €37.9 billion in Q1 2014 - a 18% increase on Q1 2013. Following an exceptionally strong end to 2013, the Q1 2014 total was predictably below Q4 2013’s €62.4billion.
The fastest year-on-year growth in Q1 2014 was seen in Austria (+183%), Ireland (+179%), Spain (+132%) and Finland (+103%). The core markets of Sweden (+68%), Germany (+47%) and France (+37%) also showed significant growth compared to Q1 2013.
Jonathan Hull, Managing Director, EMEA Capital Markets, CBRE, commented:
“A broad range of investors are active in Europe at the moment, with the strongest activity in the value-add end of the market. Lending conditions are improving across Europe, starting with Western Europe, and this means more access to debt and more opportunity for investors to borrow against non-core product.
“Opportunistic investors, particularly from the US, are targeting markets such as Spain and Ireland on the back of economic recovery and to take advantage of potential future yield compression. North American investors accounted for almost half of Spain’s total commercial real estate investment in 2013, while last year was the first time that we have seen significant activity by Americans in the Irish real estate market. This trend has continued into 2014, with Spain also seeing significant acquisitions by buyers from China and the Middle East.
“At the same time, there continues to be strong demand for core investment product in the CBD markets of Paris, Stockholm and the major German cities. There has already been considerably more international investment in the German market than has been the case in recent years, with UK and US investors buying large portfolios. Investors are also seeking value-add assets in secondary locations in Germany.”
Investment activity in the UK held relatively steady compared with Q1 2013, slipping 3% to €11.4 billion.
Simon Barrowcliff, Executive Director, Central London Capital Markets, CBRE, commented:
“London recorded its highest-ever quarterly investment total in Q4 2013, surpassing even the peak levels of 2007, so there has been a not unexpected drop in turnover in Q1 2014 due entirely to lack of available investments. Investors were, however, more active in the UK’s regions this quarter, as they seek out opportunities in the face of an increasing lack of investment product in the country’s capital. There are perhaps five or six major regional UK cities being targeted by investors, with Manchester and Edinburgh leading the pack.”
Commercial real estate investment activity in Central & Eastern Europe (CEE) dropped 35% on the same quarter last year, driven by a significant decrease in Russia, which recorded its lowest quarter since Q1 2012. Poland (+41%) showed significant growth compared to Q1 2013. Some of the smaller markets also saw decreased levels of investment; however, Romania saw significant uplift (albeit from a low base).