Europe’s commercial real estate investment market has had its strongest first half in eight years, putting it on course to eclipse the annual record level attained at the tail-end of the last market boom in 2007 by December, analysis by research firm Real Capital Analytics (RCA) shows.
Unprecedented transaction levels in London, plus strong increases in the Nordic region, the Iberian peninsula and Italy, powered Europe’s €135.3 bln of investment activity in the first six months of the year -- a 37% rise compared with the first half of 2014. The growth in investment in the first three months of 2015 continued into the second quarter, when there was a 16% rise from the same period a year earlier to €65.5 bln.
A string of substantial portfolio sales propelled investment in London to €28.9 bln in the first half, an 86% rise from a year earlier, enabling it to overtake New York City as the world’s top destination for real estate investors. Notable transactions included Brookfield and Qatar Investment Authority’s €3.6 bln takeover of the Canary Wharf estate as well as QIA’s purchase of three luxury hotels – The Berkeley, Claridge’s, and The Connaught – for an estimated €2.2 bln.
Large portfolio purchases also lay behind the 63% increase in investment in the Nordic real estate markets, which registered €15.5 bln of transactions in the first half. These included Citycon’s €1.47 bln acquisition of Norway’s second-largest shopping centre owner and manager, a Starwood Capital fund’s purchase of a portfolio of properties in Sweden and Norway for a sum in excess of €1 bln and Partners Group’s €423 mln purchase of 30 retail properties in Norway.
There was almost a six-fold increase in activity by value in Norway in the first half from a year earlier as a result of these large transactions. Denmark and Finland each had more than a 60% growth in investment activity, although Sweden dipped 7%, RCA data show. The transactions momentum in Nordic markets is set to continue following Blackstone’s announcement in July of a €2.4 bln purchase of real estate in Norway and Sweden from 10 funds advised by Obligo.
Of Europe’s larger ‘core’ markets, Germany had a 35% increase in transaction volumes in the first half to €29.1 bln while the Dutch market grew 30% to €5.91 bln by offering higher property yields and as government reforms encouraged housing associations to sell market-rate rental stock to institutions. France, Europe’s third biggest real estate investment market after Germany and the U.K., registered a 17% decline in activity in the first half to €10.6 bln. Last year’s numbers were inflated by Lone Star’s €1.2 billion acquisition of the Coeur Défense office complex in Paris while there was a 48% decline in activity in the French capital during the second quarter.
Source: Real Capital Analytics