Research by DTZ reveals that European commercial real estate investment activity reached €46 bln in Q4 2013, the highest quarterly volume since 2007. This took total investment volumes for the full year 2013 to €139 bln, up by 17% compared with 2012 (€118 bln).
Across the three core markets, the UK and Germany posted the biggest increases on a quarterly basis, +31% to €20 bln and 88% to €11 bln respectively. By contrast, France recorded a modest growth of 8% over the quarter as volumes reached €4.8 bln. The Nordics recorded a strong Q4 with €4 bln of transactions, including €1.5 bln invested in Norway. In contrast, the CEE region saw a decline in volumes to €800m over the quarter.
Nigel Almond, Head of Strategy Research at DTZ Research, commented: “Following the trend highlighted in Q3, the peripheral countries (Ireland, Italy and Spain) continued to attract investor interest and posted the biggest increase in Q4 reflecting the improved outlook for these markets. Investment volumes reached €3.7 bln in Q4, compared to a quarterly average of €1.5 bln since the beginning of the year. With €7.7 bln invested in 2013 (up from €3.6 bln in 2012), these countries accounted for 6% of the European volume in 2013 as a whole.”
Unlisted funds, listed property companies and institutions continued to dominate the European investment market. Together they represented 76% of total volumes. On a net basis, funds have re-enforced their net buyer position in Europe but to a lesser extent than in the past, investing a net €933 million in Q4 compared to nearly €3 bln on average in each of the first three quarters. Institutions continued to increase their exposure with a net investment of €1.3 bln. Having undertaken most of their portfolio restructuring, listed companies became net investors for the first time since 2012. However, they have reduced their property exposure by €400 million over the last 12 months.
Magali Marton, Head of EMEA Research at DTZ, added: “The last quarter of 2013 has seen a strong return of cross-border investors in Europe; accounting for 47% of Q4 volumes, up from 32% in Q3. Most of the foreign capital flows came from outside the region, with Asian investors the most dominant. On a net basis, non-European investors continue to increase their holdings in the region with net purchases of €7 bln in Q4, thanks to numerous purchases of various asset types in the UK, peripheral and CEE countries.”
The year-end rush has mainly benefited the retail sector with volumes totaling €12.3 bln in Q4, up 74% from € 7 bln recorded in Q3. Lead by strong volumes in the UK (€3.3 bln) and Germany (€3.8 bln), the retail sector has also registered more activity in France (€1.3 bln) and in Italy (€1 bln). There, cross-border funds have mostly targeted shopping center and retail parks. However, offices remained the most popular asset type with €22.9 bln of acquisitions recorded in Q4 2013, up from €18.7 bln in Q3. Market activity has lost some momentum in the industrial segment; large European portfolio sales which boosted volumes since the beginning of the year have been less numerous. Volumes declined by 23% quarter-on-quarter to €2.7 bln in Q4 whilst mixed-use gained in importance over the year to account for €4.9 bln in Q4.
Magali Marton concludes: “In line with our forecasts, the European market ended 2013 with double digit growth of 17% to €139 bln. The fourth quarter saw the highest quarterly volumes since Q4 2007, confirming some emerging trends in the European market. Non-European investors are clearly returning to the region and are now active in a wider range of asset types and countries. Growing institutional and sovereign capital, in particular from Asia, showed strong appetite for the European market. In this context, we confirmed our forecasts with an 8% growth anticipated in 2014 to €150 bln.”