DTZ has released its latest investment market update for Europe, which showed total commercial real estate investment activity totalled EUR36.6bn in Q2 2014, a 24% increase on the same period a year ago. Since the beginning of the year, EUR72bn has been invested in Europe, taking volumes well above 2005 levels.
Magali Marton, Head of CEMEA Research at DTZ and co-author of the report, says: “The recovery of the European market has accelerated in Q2 with the biggest increases in volume recorded in France (+71% q-o-q to EUR7.2bn), in Benelux (61% to EUR3.1bn) and in the peripheral markets -Italy, Ireland and Spain (+19% to EUR3.1bn). By contrast, activity in the UK was broadly unchanged, up just 3% to EUR12.8bn. Germany recorded only EUR6bn of transactions, after a strong Q1 (EUR9.4bn).”
Once again there were numerous deals above EUR500m in Q2 2014, totalling EUR6.7bn in value, up from EUR4.4bn in Q1. These mega-deals were concentrated in France and the UK, but also in Spain through the Klepierre-Carrefour shopping centre portfolio sale. This helped push the average deal size to EUR36m, above the Q1 2014 average of EUR28m.
Nigel Almond, Head of Strategy Research, says: “In contrast to recent trends, the growth in activity this quarter has been driven by domestic investors, with volumes representing 64% of activity. The cross border share fell to 36%, well below its average 46% in the last two quarters. North American and Globally sourced capital continued to dominate, albeit at lower levels. Asian volumes also slipped in contracts to increased activity from the Middle East. The UK continues to attract the greatest share of activity followed by Germany and France, but increased activity is also evident in Italy and Spain.”
Offices accounted for the highest volume in Q2 2014 with EUR15.8bn (43%) invested, a marginal increase on Q1 figures. Notably, the biggest increase in activity over the quarter was recorded in the retail sector, with volumes totalling EUR11bn, up from EUR8.7bn in Q1 2014. Most of this activity (63%) was driven by shopping centre sales which reached EUR6.7bn in Q2, mainly concentrated in the UK, France and Spain. High street shops and supermarkets were also high on investors’ agendas attracting a combined €2.5bn in Q2. Strong activity has been also noticed in the industrial sector, which reached a post-crisis record level of EUR4.9bn in Q2.
The UK and Finland attracted the bulk of this activity with warehouse and logistic assets the most traded.
Kasia Sielewicz, co-author and manager of investor research at DTZ, says: “The Q2 results confirm the positive trend seen in Q1 2014. The recovery of the market is still ongoing and we see more confidence from both domestic and cross-border investors acting across a wider risk spectrum. We expect this broader recovery to continue as there is substantial capital targeting Europe. As such, we forecast that activity for the full year 2014 will be up by 8% to EUR155bn and over EUR165bn for 2015.”