Cross-regional capital flows into Europe double: CBRE

Data for the first months of 2011 suggest a further broadening of non-European investor demand for European real estate in terms of both investor type and nationality, thereby continuing a trend that started to emerge in the second half of 2010. In 2010, cross-regional flows of capital from outside Europe grew to account for almost half of all international investment activity in the region, well above the 33% average reported from 2009 onwards, according to the latest research by CB Richard Ellis (CBRE).

Cross-regional investment into Europe doubled in size from the first to the second half of last year, jumping to EUR 9 bn of activity in the second half, the highest total seen since the start of 2008. However, this capital is very narrowly focused on London and Paris, with nearly EUR 8 bn of this EUR 9 bn invested in these two markets alone.

CBRE expects most of the cross-regional capital targeting European property in 2011 to remain focused on London and Paris, with only a relatively small number of opportunity-driven transactions expected in other European markets.

The first signs of revival in demand from North American investors became apparent towards the year end. Canadian capital, which was largely absent from the European market in 2008 and 2009, made a comeback with EUR 1.4 bn of real estate transacted in 2010. Heavily focused on the UK market, and Central London in particular, there were 13 deals in total by Canadian investors during the year. These mainly comprised institutions and pension funds buying core assets, such as the partial purchase of Westfield shopping centre by Canada Pension Plan Investment Board (CPPIB).

Although reduced from the EUR 25-30 bn per annum seen at the top of the market, US investments in Europe grew to EUR 5.4 bn last year, accounting for more than 40% of all cross-regional investment into Europe. In contrast to Canadian investors, US investors were mainly property funds looking either at the core end of the market (evident from the JP Morgan co-purchase of Opernturm in Frankfurt), or further up the risk spectrum in search of value-add opportunities.