European Property investment up 11% over Q1 2012
Core Markets Driving Overall European Performance
European commercial real estate investment increased by 11% in the first quarter of 2013 (Q1 2013) compared to the same quarter last year, with the core markets showing strong performance and several of the countries hardest hit by the euro crisis showing increasing activity, according to the latest research from global property advisor CBRE.
Commercial property investment in Europe totalled €29.4 billion in Q1 2013 compared to €26.5 billion in Q1 2012. Following a strong finish to 2012, investment was expected to fall back significantly; however activity in the core markets - UK, France and Germany - all showed significant increases relative to Q1 2012 resulting in a stronger than expected Q1 2013 total.
Compared with Q1 2012 investment activity increased 48% in France, 32% in Germany and 8% in the UK. There was also an improvement in investment activity, albeit from a low base, in several of the countries affected by the euro crisis. Ireland in particular has now seen two successive quarters of sharply higher investment activity and this quarter Portugal and Spain also showed increases relative to Q1 2012. Commercial real estate investment in Italy was up 38% on last quarter, but saw a large drop on Q1 2012 levels, although this was largely due to one particularly big transaction in Q1 2012.
The improvement in sentiment in eurozone countries echoes investment trends in other asset classes, where investors have been increasing their exposure to risk for some time. However, CBRE cautions that, in the real estate investment market, it is premature to draw too many conclusions from one quarter of activity, especially as the number of transactions in these countries remains low.
Offices accounted for the largest share of European investment activity at 44% of the total (€12.9 billion), but the jump in industrial activity to 13% of transactions (€3.7 billion) – was significantly ahead of the long-term average of around 8% for the sector. Retail investment accounted for just over a quarter of Q1 2013 activity, with the highest levels in the UK (€2.4 billion) and Germany (€2.1 billion).
The overall increase in property investment activity in Q1 2013 compared with the same period last year is in line with the results of CBRE’s Real Estate Investor Intentions survey, conducted in early February 2013. This recorded a majority of investors expecting their purchases in 2013 to be higher than in 2012, with an increasing number expecting to spend 20% more than last year. The CBRE survey predated the Italian election, the Cyprus banking crisis and problems with the latest Portuguese budget; however, the financial markets have mostly shrugged off these worries and therefore the real estate market may well follow suit.
Jonathan Hull, Head of EMEA Capital Markets, CBRE, commented:
“With Europe still in recession investors continue to focus on the core markets – reflected in the performance of markets such as London, Paris and the German cities over recent months. There is also some indication that investors are more actively looking at the southern European markets as investors start to seek yield instead of just capital preservation. Increased confidence in Ireland’s economy has led to signs of recovery, with the country seeing the highest level of investment activity since its peak in 2007.”
About CBRE Group, Inc.
CBRE 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 and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE 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.
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