European real estate investment up 12% at H1 2013

European commercial real estate investment reached €58bn in the first half of 2013, up 12% compared to the same period in 2012, according to the Jones Lang LaSalle Global Capital Flows Q2 2013 report.

This increase reflects the sustained attraction of commercial real estate in the largest European cities but also a substantial improvement across Southern Europe, where activity increased 34% in comparison with H1 2012.

Driving this was the doubling of non-domestic investment, with acquisitions by Allianz and AXA in Italy, Qatari investments in hotels in Italy and Spain, and most notably the €150m acquisition of the Generalitat office portfolio in Spain by AXA, marking the first foreign acquisition since the Spanish sovereign crisis.

The high volume of bids for prime assets across Southern Europe demonstrates the improving sentiment across the region. The prime yield in Madrid also moved in 30 basis points which is the first move since Spain’s sovereign debt crisis.

Ireland has been the first peripheral market to stage a recovery. Volumes in H1 2013 have reached €533m, against a full year 2012 recorded total of €673m. The success of Green Property, the first Irish REIT in raising €310m against a target of €200m plus an increase in available stock highlights the return in confidence across the country.

Richard Bloxam, Head of European Capital Markets at Jones Lang LaSalle explained: “The largest markets of the UK, France and Germany remain attractive to global real estate investors, however, as we anticipated volumes are beginning to increase in Southern Europe reflecting the rising appetite from investors over the last nine months. Current investor sentiment would suggest that activity will accelerate as the bid/ask spread begins to narrow.”

Retail and portfolios

H1 2013 also marked an uptick in retail volumes year on year, primarily due to the increased availability of stock. The joint venture between SES Spar European Shopping Centres and Allianz Real Estate in a portfolio of seven shopping centres in major cities in Austria, Slovenia and Italy also reaffirms the returning confidence and increasing interest in country and cross-border portfolios, with investors looking to gain scale quickly. Additional notable deals include the sale of BelAir, Brussels to a joint venture between Hannover Leasing and an Asian institution for over €300m, the South Korean acquisition of “Gallileo” offices in Frankfurt for €262m and Silesia City Center being acquired by an international investor consortium led by Allianz for €412m.

Robert Stassen, Head of European Capital Market Research added: “At the half-way stage, Europe is on track for €125bn, mirroring full year volumes recorded in 2012. Although a lack of prime opportunities has constrained activity in some markets, this has been counterbalanced by growth elsewhere. We feel that investment sentiment is improving which together with better availability of debt, has given investors the confidence to increasingly invest outside the prime locations. This should translate in solid reported investment volumes in the second half of the year and could mean that there is further upside to our full year forecast.