CBRE: investment into European property breaks the €100 billion barrier (EUR)

A record total of €103.6 billion was invested in the EU-15 property markets in 2004. This surpassed the previous peak recorded in 2002 and represented a 26% rise on 2003’s total.

The improvement in the global economy gathered speed in 2004, boosting investor confidence and resulting in an active six months for property transactions. By the second half of the year this economic growth had begun to filter through the occupier markets. Demand from tenants was on the increase and rental growth was evident in some core locations. This further strengthened the case for property investment and the second half of 2004 saw €57.9 billion transacted, a 27% increase on the first half of the year.

Despite the considerable reduction in new money flow intro German open-ended funds, the Germans remained the most active cross-border investor. There were also few surprises amongst the other most active nationalities, which included the Americans, Irish and Dutch. However, there was more cross-border activity from UK investors than in previous years, predominantly buying in France.

Analysis of the most popular destinations for investors also shows few surprises. The UK comprised half of the total amount transacted in 2004, a third of which took place in central London.

During the first half year the market was dominated by local investors, with cross-border acquisitions representing just 23% of the total. However, this was turned around in the second half of the year and cross-border investment totaled 31% for 2004 as a whole. This was down significantly on the 42% they accounted for in 2003, although in cash terms the €31.5 billion purchased by cross-border investors in 2004 was only slightly lower than the €34.6 billion in 2003.

It appears likely that 2005 will be another strong year for property investment across Europe. The cost of borrowing is very low, demand for investment property remains unprecedented and there are still more buyers than sellers. Strong competition for prime buildings is forcing investors to consider purchasing lower quality properties in secondary locations. Previously focussed on income return, an increasing number of investors are now interested in opportunities to add value.

Source: CBRE

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