Agressive bidding drives strong property investment activity in final quarter of 2010
European commercial property investment jumped to €35.8 billion in Q4 2010, pushing the annual total to €105 billion
The fourth quarter (Q4) of 2010 surprised on the upside for Europe’s commercial real estate investment market, with €35.8 billion of activity recorded, according to the latest data by CB Richard Ellis (CBRE). This is by far the highest quarterly investment total since the first quarter (Q1) of 2008, and represents a 27% increase compared to the same period last year at (€28.1 billion).
Two factors were most evident in driving this growth. One was the steady flow of large transactions completed, such as the €1 billion plus Stratford City shopping centre sale in the UK, the Opernturm office deal in Germany and the €475 million sale of mixed-use asset Klara Zenit in Sweden. However, it was the aggressive bidding by investors in core property that had a more profound effect and broader impact across the markets.
Investment activity in Europe has picked up significantly in the last six months, but has been concentrated only in a handful of markets. Germany, France and Sweden were the main beneficiaries, together accounting for more than €15 billion of transactions in the final quarter of 2010, twice as much as their combined total in Q3 2010. As a result these three markets together accounted for 42% of the European investment total in the final quarter, the highest proportion since Q4 2007.
Michael Haddock, Director of EMEA Capital Markets Research, CB Richard Ellis, commented: “The UK was the first market to recover in this cycle, but activity appears to be reaching a plateau. Investor interest has been shifting to the most liquid of the other European markets, Germany, France and Sweden. It is also significant that these are the countries where the economic fundamentals are strongest.”
Jonathan Hull, Head of EMEA Capital Markets, CBRE, said: “Aggressive bidding for prime assets became something of a ‘market norm’ in 2010, intensifying even further toward the year’s end. Whilst demand increased through last year, it remained highly focused on core assets and markets. With available product unable to meet this demand, it presents a supply problem, and it is difficult to see this changing in the short-term. Some investors are starting to look into the next notch up the risk curve – but still very much concentrating on the core markets. An exception to this is Spain, where higher yields are attracting core investors, even once the sovereign debt risk and weak economic performance are taken into account.”
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 2009 revenue). The Company has approximately 29,000 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