EUROPE - Many of Europe's cross-border investors returned to the real estate market in the second quarter, replacing domestic investors as the most dominant active group.

The latest European Capital Markets Bulletin from Jones Lang LaSalle (JLL) suggested cross-border commercial real estate investment activity in Europe rebounded in Q2 2009 from a low of 27% in the previous quarter to 52%.

There was also a particularly strong increase in activity of 169% from investors outside Europe, the report said.

Total direct investment in commercial real estate in Europe was €12bn in Q2 - a similar level to Q1 - and €24bn in the first half of 2009 - although this was 42% down on the second half of 2008.

Overall volumes stabilised in the second quarter, but most activity was seen in core European markets, with some showing a strong upturn in volumes.

France recorded the largest increase in quarterly volumes, almost doubling investment activity to €1.2bn.

Other major markets witnessing an increase in second quarter trading were Italy, the Netherlands, Spain and Sweden.

Germany and the UK increased slightly, while Belgium and central and eastern Europe were among the markets which recorded lower Q2 activity. 

Over the first half of 2009, the UK remained the largest market and took 35% of total investment activity, slightly ahead of its historical average and reflecting strong investor interest for a market which has significantly repriced.

German investors remained the largest net buyers in Europe in the first half of the year with net purchases of €1.8bin.

Second largest were investors who source their capital at a global level, followed by Middle Eastern investors and then Russian investors.

Reflecting a trend seen in the previous year, UK investors continued to be the largest net sellers in the region, typically disposing of their domestic holdings, with net sales of €4.3bn in the first half of 2009.

UK investors were joined by Spanish and Dutch investors as the largest net sellers in Europe.

"For the first time in eight quarters we have seen a stabilisation in transaction turnover in Europe; but beyond this there has been a clear increase in investor appetite in the sector," said JLL's Tony Horrell.

"In Europe's largest markets we are seeing price tension, increased levels of bidding and greater investor interest, both in terms of investor types and sources of capital. Cross-border investors have made a strong move back into the market and are in some cases now having difficulty in securing prime product," he added.