Green shoots of recovery are at last starting to appear in the European property market, with investment volumes jumping 53% in the third quarter to EUR 19.6 bn, yields stabilising and even the occupational market managing to show some more encouraging signs, at least of approaching stability, according to Cushman & Wakefield's latest European commercial property investment update.
Green shoots of recovery are at last starting to appear in the European property market, with investment volumes jumping 53% in the third quarter to EUR 19.6 bn, yields stabilising and even the occupational market managing to show some more encouraging signs, at least of approaching stability, according to Cushman & Wakefield's latest European commercial property investment update.
As in the second quarter, increased activity has been driven by cross-border investment, which more than doubled on the previous quarter and stood at its highest for over a year. International investors increased their share of activity to 44% versus 31% in the opening six months. Whilst more cautious, domestic investors were also increasingly active, accounting for EUR 10.9 bn in investment, up 29% on the second quarter, and making a particularly significant contribution to the resurgence in activity seen in markets such as Germany and France.
Average prime yields across Europe now stand at 7.51% and over the third quarter were stable in 21 of the 32 countries analysed. Overall they actually fell 1basis point (bp) on the quarter, albeit solely due to the UK, where yields dropped 24 bp to 6.73%. This is still marginally higher than the Western Europe (excluding the UK) average (6.68%), which rose 3 bp, the smallest quarterly increase since late 2007. Elsewhere, Central and Eastern European averages were largely stable, but performance is increasingly diverse, with yields holding firm in Poland and the Czech Republic, as wel as Russia, but moving out further in Bulgaria, Romania and Hungary amongst others.
'Investors are clearly still very focused on prime, secure income producing assets with limited interest for anything else,' said Michael Rhydderch, head of the European Cross Border Capital Market Group at Cushman & Wakefield, 'The bigger, more liquid Western markets are leading, with the UK very busy but France also enjoying better international demand and Germany seeing good interest from local buyers. Elsewhere investors are looking for distress and hence markets which have fallen a long way are being re-examined. Spain had a good quarter, as did core markets such as Belgium and the Netherlands. In other areas the picture is more mixed, with an increasingly polarised market in terms of activity and performance.'
