Commercial real estate transactions in Europe are becoming more expensive and complex and are taking longer to complete, according to a new report from Drooms.
The provider of virtual data rooms said the findings of its inaugural Real Estate Transaction Barometer 2022 showed that the number of days it took to carry out a property transaction – from the bidding process to completion – rose from 165 in 2019 to 258 as at the first half of 2022. The transaction length went up by 33% between 2019 and 2020.
Alexandre Grellier, CEO and co-founder of Drooms, said: “This shows clearly that the time needed for real estate transactions is on the increase. This effect can be explained partially by delays resulting from the coronavirus pandemic and the general economic situation.
“However, we believe that the increasing number of regulations, for example in the ESG area, are another reason for longer transaction lengths. At the same time, transaction activity dropped sharply at the start of the pandemic. However, our study shows that the market is optimistic, at least in the longer term.”
The study which evaluated more than 4,000 transactions as well as surveying around 170 real estate experts in Europe, revealed that despite the uncertainty surrounding interest rate increases, the Ukraine conflict and inflation, the market appears optimistic overall.
Over a third (36%) of the experts surveyed are planning to expand their investments into international real estate markets.
Around 47% plan to invest about as much as they did previously, while only 17% are aiming to reduce their activities, the report said.
Nearly 20% of German businesses are planning to reduce their investment activities, 23% plan to expand them and 58% aim to invest about as much as in the previous year.
In the UK, as many as 82% of investors plan to expand their international business. The majority (64%) of French real estate professionals also want to invest more internationally, according to the research.
In Spain, around 42% of investors aim to become more active at an international level and 46% plan to invest about as much as they did previously, the report revealed.
“Although the current circumstances are placing a strain on the transaction market, international real estate investments are at a premium. This means that there are opportunities for increased returns on investments as well as diversification potential. Most German investors are aiming to cut back on their international investments, but this could also be due to the strong domestic market,” said Grellier.
According to the survey, Germans (51%), Americans (26%) and Brits (23%) are the main drivers of the European real estate market.
The survey also revealed that the markets in the DACH region and the UK were the most attractive for capital investors at 52% and 26% respectively. However, 21% of respondents also see significant potential in the CEE region.
The report showed that logistics and residential asset classes are at a premium at 34% and 27% respectively. This is where investors see the biggest investment opportunities due to the secure cashflows and controllable risks. A focus also remains on offices (16%), despite many employees working from home, the report said.
Drooms is a provider of virtual data rooms, grants companies controlled access to confidential corporate data across company boundaries and specialises in customised solutions across the entire value-added chain. The platform is used by more than 25,000 companies, including real estate companies, consultancy firms, law firms and corporations such as JLL, JP Morgan, CBRE, Rewe and UBS.
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