The impact of the recent economic recovery appears modest but palpable: according to the latest available data by BNP Paribas Real Estate, in 2015 the economies of the Eurozone created more than 3 million additional jobs (at end-September), the unemployment rate fell by around 1pp of the active population to 10.5%.
In Q1 2016, on a rolling year basis, the total investment volume amounted to €253bn, 8% up on the same period in 2015. Offices remained investors darling with a stable share of 45%, rising to €113bn (+7%). The investment in the retail segment were 18% up.
Over the last 12 months, foreign investors represented 51% of the total volume invested in commercial real estate. They invested €129bn, a 16% increase compared to Q1 2015 on a rolling year basis.
With liquidity still abundant, prime yields are still falling and Q2 2016 could see further compressions.
With an investment volume of €13.9bn during Q1 2016, the UK dropped 39%. There was a marked absence from American investors (-83%) in the country, they used to invest more than 1/3 of the total investment volume these last 10 years.
At the same time investment volume in Germany amounted to €8.3bn representing a drop of 14% between Q1 2015 and Q1 2016. This remains a high figure, above the 10-year average for a first quarter.
The French investment market also recorded a marked slowdown during Q1 2016 with €3.7bn. Both Logistics and retail investment volume were up 10% in Q1 2016 vs Q1 2015 but not sufficient to compensate the 60% slump on the office segment. In France, foreign investors only represented 30% of the total volume; consequently there was a major drop in the >€100m deals. A catch-up is anticipated in Q2, driven by sizeable transactions, particularly at La Défense.
With a total of €17.5bn recorded during Q1 2016, the investment activity in Europe apart from UK, Germany and France remained stable on average. “Europe beyond core markets gained share, representing 40% of total European investment volume (vs. 32% in Q1 2015). Belgium, the Netherlands and the Nordics continue to enjoy rising investment activity while countries such as Spain, Italy and Ireland could not rivaled their Q1 2015 take-off.” said Aymeric le Roux, executive director, international advisory & alliances at BNP Paribas Real Estate.
The letting activity in Central Paris bounced back on a subdued activity during Q1 2015, the performance was sustained by the revival of large transactions. The ongoing healthy state of the labour market in Germany sustained the surge in occupier demand in the four main cities, especially in Berlin with record Q1 results in 2016. In Central London, take-up consolidated above standard Q1 levels.
The global improving occupier demand has triggered further decrease in vacancy rate over the last 12 months in the Tier 1 cities, such as in Central London (-14%), Berlin (-16%) or Munich (-30%).
Consequently, prime rents saw an additional growth over the same period in the West End (+14%) and recorded a historic record level. Prime rental growths are mainly driven by the shortage of prime office premises available on the CBD markets.
