Deal volume rises 4% in 2011 as investors flock to French property in Q4

Commercial real estate investment turnover in Europe rose 4% in 2011 to EUR 115 bn, according to the latest research from CBRE. The full-year figure was boosted by a strong finish in the fourth quarter of 2011 with investment activity rising 15% compared with the previous quarter to EUR 32bn.

The uptick in commercial real estate investment in Q4 2011 versus Q3 2011 was particularly strong in France (+65%), the Nordics (+40%) and Benelux region (+42%). Property investment activity in Iberia also more than doubled over Q3, although the improvement was from a very low base.

'Despite the uncertain economic climate, 2011 European property investment topped activity levels seen in 2010, buoyed by a strong year end,' commented Jonathan Hull, Head of EMEA Capital Markets, CBRE. 'Investors are still targeting prime assets in liquid markets, and final quarter numbers confirm that France, Germany, the UK and the Nordics are key to core strategies.'

The French real estate investment market recorded EUR 6.5bn of activity in Q4 2011. This was the highest quarterly turnover for France since Q3 2007 and was ahead of every other market in Europe during Q4 2011 except the UK, which saw an estimated EUR 8.3bn of investment activity. Investment activity in France was heavily biased towards the Paris office sector and included large portfolio and single-asset deals. The level of activity was boosted by the year-end deadline for sales of corporate real estate to REITs at a lower capital gains tax rate. This resulted in a higher level of suitable supply, but other factors, such as the need for liquidity among some investors, also contributed to the bumper year-end performance.

Commercial real estate investment activity in the Nordics was strong across the region in Q4 2011, with Sweden and Denmark performing well. In part, the Nordics benefited from safe haven demand due to their position outside of the eurozone. After building momentum during the year, market turnover in both Central and Eastern Europe (CEE) and Italy slowed in the final quarter.

Reflecting the economic divide between northern and southern Europe, commercial real estate investment in ‘core’ northern markets - in particular the UK, France, Germany and Sweden - have shown growth on an annual basis. In contrast to this, investment in Italy, Portugal and Spain suffered from lower levels of activity in 2011 compared with 2010.