Market Momentum Builds As Q1 European Property Investment Hits €26.7 Billion
Germany is a New Market Hotspot as €5.5 billion is Invested in Q1 2011
London, 12 April 2011 – The first quarter (Q1) of 2011 saw European commercial real estate transactions hit €26.7 billion as the investment market builds further momentum, according to the latest data by CB Richard Ellis (CBRE).
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The Q1 2011 activity constitutes a 26% increase in investment turnover compared to the same period last year and is a higher quarterly total than any of the first three quarters of 2010. The Q1 2011 activity did decline from Q4 2010’s total of €38.6 billion; however, a fall from Q4 to Q1 is expected as Q4 has traditionally seen a strong surge of activity prior to year-end.
As was the trend last year, the vast majority of investor demand is targeting core assets and markets, which continues to drive yields further down, with the latest CB Richard Ellis EU-15 Prime All Property Yield Index falling by 6 basis points (bps) over Q1 2011 to 5.53%. This is a 26 bps fall year-on-year, and reflects aggressive competition for core product.
Investor sentiment is starting to shift further along the risk curve, albeit very selectively. There are two distinct dimensions of risk that investors are starting to consider – asset specific risk and market risk:
In terms of taking additional asset risk, those markets where economic and occupier fundamentals are strongest are expected to benefit most. For example, Germany has become an investment market hotspot with €5.5 billion invested in Q1 2011, particularly in the retail sector – which saw close to €4 billion invested in Q1 2011, already above the 2009 annual total. The UK (or more specifically London), and to a lesser extent France and the Nordic regions, also fit into this category.
At the same time, there is also increasing investor interest in prime properties in what are seen as riskier markets. These would include Spain, core Central and Eastern Europe (CEE), and even first glimpses of interest in fringe CEE markets.
Jonathan Hull, Head of EMEA Capital Markets, CBRE, commented: “The growing influence of institutional type capital in the direct European property investment market is one of the key themes this year. Increasingly diverse in origin, from Canadian pension funds to Middle and Far Eastern capital, it will continue to support the core end of the European market This is prompting specialist managers to look into more ‘value-add’ opportunities - a move we expect to see more of this year.”
Marie Hunt, Executive Director, CB Richard Ellis, Ireland, said “The stalemate that is ongoing in the Irish investment market at present in reaction to Government proposals to retrospectively review rents in business leases, is clearly evident when you consider the volume of investment trading in other European markets. Only two transactions amounting to €124.25 million were signed in the Irish investment market in the first three months of 2011 and it is unlikely this situation will change until such time as the Government clear up the uncertainty on this issue. The unfortunate outcome is that many of the international buyers that are active in other European jurisdictions and who can see opportunities to purchase investments in the Irish market, will not invest here until there is clarity.
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About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2010 revenue). The Company has approximately 31,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
Sources: In addition to CB Richard Ellis, data for this release is drawn from KTI, Property Data and Realia Management