European commercial real estate investment transactions fell to the lowest level in six years in the first quarter of 2019, According to Real Capital Analytics (RCA).

The research from the property data firm said the property deals fell during the first three months of the year, with “slowing economic growth and political uncertainty” weighing on markets where high pricing and the difficulty of sourcing assets are also impacting sentiment.

RCA’s latest Europe Capital Trends Q1 report showed investment deals totalling €44.5bn between January and March, were 32% down on the same quarter of last year and at the lowest level since 2013.

The total was also below the €71bn average in European transaction volumes in recent first quarter periods, the report said.

RCA said despite apartment investment volumes being relatively weak in the first three months of the year, the sector continued to pull ahead of falling retail transactions.

During the first quarter of the year, the apartments sector maintained its number two position as the second largest European property investment market after offices.

Tom Leahy, RCA’s senior director of EMEA Analytics, said deal volumes in the European apartments sector overtook retail in the second-half of 2018 for the first time.

“Residential real estate has now consolidated its lead in the first quarter of 2019 as the second largest investment market after offices.

”Investors appear to be voting with their capital in favour of alternative property asset classes and particularly residential over retail.”

The inroads made by e-commerce into the market share of physical stores, Leahy said, has ”undermined retail’s previous reputation as the stable rental income producing mainstay of investment portfolios.”

At a country-level, the UK recorded the first quarter of the year as the slowest for real estate transactions since 2016.

“London did, however, buck the wider trend across the top European metropolitan markets, as investment volume rose in the first quarter, compared with a year ago, RCA said.

This was mainly due to the £1.2bn (€1.3bn) acquisition of the new Goldman Sachs headquarters by LaSalle on behalf of South Korea’s NPS. This was the second highest price ever paid for a single asset in London.

RCA said even without this deal, parts of the city’s market remain relatively buoyant, notably in the alternative property sectors, with close to €1.6bn of hotels and €832m of apartment buildings trading.

“Surprisingly Europe’s perceived ‘safe haven’ market Germany lagged behind the UK’s weak performance and recorded a slower first quarter than is typical.

“The reluctance of some buyers to acquire assets at current asking prices, combined with the cuts in German economic growth forecasts, probably lies behind the cooldown in the market,” RCA said.

France also experienced a slow start to the year, although on a 12-month basis cross-border investment in the country was at the highest level since 2007.

In the Nordics, Sweden and Finland had a comparatively strong first quarter, but this was from an exceptionally low base in the same period of 2018 and it is likely a case of these markets returning towards average levels rather than a substantive shift in trends, the report said.