European commercial real estate investment fell by 40% in the first quarter of 2016, according to Real Capital Analytics.

The company said volatility in global financial markets led investors to reassess prospects for the asset class following record transaction activity last year.

Uncertainty surrounding the UK’s referendum on European Union membership was one reason for the decline, a sentiment also recently expressed by many real estate professionals here

RCA said €46.7bn worth of European properties exchanged hands in the first three months of 2016 compared with €77.6bn in the same period last year.

Investment fell across all major Western European markets, led by a 59% drop in France. 

All sectors, with the exception of industrial properties, were affected.

Concerns about the outcome of the 23 June referendum on the UK’s EU membership contributed to a 43% drop in investment in the UK.

Investment volumes totalled €14.4bn in the first quarter of this year, while the volume of deals involving London properties were down 47% to €6.7bn.

Tom Leahy, RCA’s director of EMEA analytics, said: “Uncertainty over the ‘Brexit’ vote is certainly contributing to the drop in the UK market, but it needs to be seen in the broader context of the slowdown across Europe.

“It is one factor among many causing investors to rein in their purchases of commercial real estate in Europe’s largest investment market at a time when yields remain below their long-term average, particularly for prime assets, and deal volumes in the fourth quarter were at record levels.”

A second-half rebound in the event of a remain vote is, Leahy said, “not off the cards, though”.

Leahy said last year’s high level of investment was unsustainable, making a slowdown “probably inevitable”.

Volatility in financial and commodities markets, concerns about China and falling global trade volumes caused many investors to take stock, Leahy said.

“Pricing is holding up, and the fundamentals that have made real estate so attractive to investors remain in place.” 

Nine of the 10 most active commercial real estate markets in Europe, by value of deals, registered falling investment volumes.

France, the third largest, suffered a 59% decline in the first quarter from a year earlier to €3.5bn, while there was a 36% slowdown in Germany to €9.9bn.

Leahy said transaction volumes would be unlikely to eclipse last year’s levels.

The US registered a 20% drop in the same period, while investment activity also weakened in the other major global real estate markets of Australia, Canada, China and Japan. 

Countries that bucked the quarterly negative trend in Europe were Finland and Poland.