REAL ESTATE – Direct investment in Europe’s commercial property market rose 40% in 2005 to hit a new record of €141.7bn, a new study by US real estate broker CB Richard Ellis shows.

Of the €141.7bn invested directly in commercial property, 55% went to the UK alone, according to the study, unveiled at the Mipim industry conference in Cannes last week.

France accounted for 11% of the direct investment, followed by Sweden (9%) and Germany (8%), the study said. The remaining 17% went to the countries of the former EU-15.

Taking a closer look, the study found that one-third of the direct investment in 2005 was concentrated in London and Paris. It also noted that cross-border transactions jumped 70% over 2004 to total €54.4bn – or 38% of the total volume.

In 2006, Nick Axford, head of research for Europe, the Middle East and Africa at CB Richard Ellis, said investors would continue to show great willingness to invest directly in European commercial property.

“The sudden rise in interest rates at the end of last year did take some wind out of the market. However, there still are plenty of investors who are far less sensitive to higher refinancing costs and who still see opportunities,” Axford was quoted as saying at the Cannes conference.

Axford said that along with continued strong demand for commercial property, supply would also increase in 2006. As an example, he cited the situation among German open-ended real estate funds.

Over invested in German commercial property, these funds are currently selling off their holdings to boost liquidity and also diversifying away from the domestic market.