DTZ cuts investment forecast as debt crisis continues

DTZ has downgraded its European real estate investment forecast for 2012 due to the ongoing deterioration in Europe's economic outlook.

In its latest European Investment Market Update, the broker, part of Australian group UGL, said it expects volumes to shrink by 11% to EUR 100 bn this year from over EUR 110 bn in 2011 as uncertainty about economic prospects impacts on the commercial real estate market.

'The end of 2011 and the first quarter of 2012 have seen investors' and lenders' sentiment deteriorating significantly,' said Magali Marton, head of DTZ CEMEA Research. 'As a consequence, we have downgraded our last forecast of the investment volume to EUR 100 bn in 2012. Despite this decline, the European market remains attractive for most of the investors and private equity funds in Europe and outside. The size of the market, its diversity and the wide range of yields will continue to attract capital flows.'

Europe's real estate investment activity declined by 30% quarter-on-quarter to EUR 23.4 bn in Q1 2012. Private property vehicles and companies are still the dominant players, with EUR 14.2 bn of acquisitions and a net investment of EUR 2.2 bn over the quarter. Listed property companies remained net sellers in Q1 as they took advantage of demand for better quality assets

Among Europe’s three largest markets, the UK is the only country to have posted an increase in Q1 in euro terms. UK volumes rose by 2% to EUR 8.9 bn in Q1 compared with EUR 8.8 bn in Q4 2011. In contrast, France saw its volume shrivel to EUR 2 bn from a record EUR 8 bn at the end 2011. The German market has also been impacted by the slowdown with EUR 5 bn invested, down by 18% from Q4 and by 5% from the first quarter of 2011.

Elsewhere in Europe, the Nordic markets continued to register buoyant activity with EUR 3.2 bn invested compared to EUR 3.8 bn in Q4 2011. The decline in activity registered in Q4 2011 in CEE has continued with only EUR 717 mln of investment in Poland and no investment activity reported in the Czech Republic or Hungary.