Cross-border commercial real estate investment activity in Europe in Q2 2009 has rebounded and accounted for 52% of total direct commercial investment volumes, up from a low of 27% in Q1 2009, signalling increased appetite from international and pan-European investors, according to Jones Lang LaSalle's new European Capital Markets Bulletin.
There was a particularly strong increase (169%) in activity from investors outside Europe. Total direct investment in commercial real estate in Europe was 12bn in Q2, a similar level to Q1, and 24bn in the first half of 2009, 42% down on the second half of 2008, according to Jones Lang LaSalle.
In Q2 overall volumes stabilized, and we saw increased activity in most European core markets, with some showing a strong upturn in volumes. France recorded the largest increase in quarterly volumes, almost doubling investment activity to 1.2 billion. Other major markets which witnessed an increase in second quarter trading were Italy, Netherlands, Spain and Sweden. Germany and the UK increased slightly. Belgium and CEE were among the markets which recorded lower Q2 activity.
Over the first half of 2009 the UK remained the largest market and took 35% of total investment activity, slightly ahead of its historical average and reflecting strong investor interest for a market which has significantly re-priced.
Nigel Roberts, Chairman of EMEA Research at Jones Lang LaSalle, commented on changes in investor types: "German investors remained the largest net buyers in Europe in the first half of the year with net purchases of 1.8 billion. Second largest were investors who source their capital at a Global level, followed by Middle Eastern investors and then Russian investors. Reflecting a trend seen in the previous year, UK investors continued to be the largest net sellers in the region, typically disposing of their domestic holdings, with net sales of 4.3 billion in the first half of 2009. UK investors were joined by Spanish and Dutch investors as the largest net sellers in Europe."
Looking ahead to the rest of the year, Tony Horrell, Head of European Capital Markets at Jones Lang LaSalle, commented: "For the first time in eight quarters we have seen a stabilisation in transaction turnover in Europe; but beyond this there has been a clear increase in investor appetite in the sector. In Europe's largest markets we are seeing price tension, increased levels of bidding and greater investor interest, both in terms of investor types and sources of capital. Cross border investors have made a strong move back into the market and are in some cases now having difficulty in securing prime product."
Tony Horrell continued: "Moving into the second half of the year, we expect transaction volumes to pick up in the region in almost all major markets - although some markets will remain out of favor. London has demonstrated that demand can ramp up very quickly once investors gain confidence and markets re-price. Investors who are looking at Continental Europe should take note that, in the space of just a few months, the London market has become a very crowded one for the best buying opportunities. Paris is set to become the next market in Europe to see a mini investment rally. We are seeing a definite uptick in buyer enquiries in the French capital and the best assets generating interest from multiple parties."
He concluded: "For the time being we expect investor interest to continue to focus upon longer term secure income producing opportunities. This band of real estate will make the headlines, whilst opportunities with greater risk profile remain in the minority, particularly against the background of soft occupational markets."