The first half of 2015 has witnessed the highest levels of commercial property investment activity in Europe since 2007, according to the European Investment Briefing, a report from international real estate advisor Savills. The investment volume across the 16 participating countries totalled almost €102.5 bln in H1, the highest performing first six months since 2007, and 25% up on the same period last year.
“In line with our Q1 forecasts, the European investment market is on track to top €230 bln by the end of this year as commercial property investors continue to favour core markets, with the UK, Germany and France still accounting for 67.8% of the total volume,” says Lydia Brissy, director at Savills’ European research team. “However, the share of the markets outside of the top three countries is increasing, due to stronger investor interest for non-core countries, which offer attractive pricing and supply of large assets and portfolios. Overall, investors are more open to move up the risk curve. They seek future yield compression by targeting secondary or alternative assets in core cities, or prime assets in secondary markets.”
The office sector continued to dominate the investment activity in most countries across Europe, capturing about 39% of the transaction volume per country on average. The only exceptions where retail properties accounted for a higher share of property investment deals were Germany (42%), Finland (43%), Netherlands (43%), Norway (62%) and Portugal (83%), which saw the sale of large-scale retail portfolios in the past quarter.
Marcus Lemli, head of European Investment at Savills, comments: “International investors have continued to drive up volumes, particularly the equity funds from the US, which have been acquiring retail portfolios or landmark office buildings.”
This has furthermore enabled some of the more peripheral countries to record the strongest rises in investment volumes over H1 2015, notably Portugal (720%), Norway (391%) and Italy (154%). In Q2 2015 the share of US money invested out of the cross border volume has been remarkable, averaging 40% per country, and accounting for as much as 93% in Portugal, and 66% in Ireland.
Marcus Lemli adds: “With healthy investor interest, Europe has seen a shift towards larger transactions. The most significant rises in portfolio deals were noted in Germany and the Nordic markets and consequently, there has been a marked uplift in activity in the regional markets.”
In the first half of this year, the volume of investment in regional markets rose to more than half of the total volume in each country, compared to an average of one third last year. Interestingly, both France and the UK saw above average activity in their regional markets.
Source: Savills
