There was a distinct buzz in the air at this year’s edition of Expo Real in Munich.

There was a distinct buzz in the air at this year’s edition of Expo Real in Munich.

Indeed, it swelled on day two as the sun came out to give delegates an extra reason to feel upbeat. As always the brokers led the charge of optimists, with firms like CBRE and DTZ upgrading their forecasts for investment volumes in Europe and Germany for the full year. Indeed, if Jan-Willem Bastijn, head of capital markets EMEA at Cushman & Wakefield, has read his tea leaves correctly, the European real estate industry is heading for a record level of investment volume in the last three months of the year. ‘This could be the mother of all fourth quarters,’ he told PropertyEU.

Bastijn is by no means the only one who thinks that the only way is up, at the very least until the end of the year and into 2015. Amid the usual flood of brokers’ reports at Expo, there were very few which didn’t have the word rise - or an equivalent synonym - in the headline. For DTZ’s Great Wall of Money report, our title read:Property wall of money rises 15% in H1. This figure is global and for Europe the amount of new capital targeting the region is slightly lower, but it is still in the double digits – or 11%.

For the full year, DTZ is now predicting €175 bn of investment transactions in Europe, which would mark a 22% increase on 2013. Moreover, a similar increase is expected in percentage terms for 2015 when total investment volume in Europe is set to climb another 20% to reach €210 bn. That figure would actually top 2006 volumes, DTZ said.

RECORD LEVELS OF CAPITAL
A record level of that capital is targeting Central London, according to James Hammond, director of Capital Markets Central London at CBRE. ‘We have never seen the depth and diversity of equity that we are seeing today. There is just not enough product for everyone,’ Hammond said, speaking at a conference during Expo Real. ‘London is always the first stop for overseas investors. We have seen this trend again and again, it is due to the liquidity and accessibility of the market,’ he added.

But London is not the only destination for the growing wave of global capital. In France real estate investment will pass €15 bn for Q3 2014, a 10% increase on the same period last year, a Savills report released at Expo Real revealed. The surge is partly to due to an increase in appetite from overseas investors, in particular for big ticket and landmark buildings, said Boris Cappelle, director of investment at Savills France.

Germany is likewise on the radar of global investors and many of them are from Asia, according to Peter Schreppel, CEO of CBRE Germany. ‘There are bags of money - many billions of euros - coming out of Korea, Malaysia, China and Taiwan. The Japanese are waking up as well,’ he said. The capital flows are also coming from other parts of the world, he added. ‘The Americans are back in the market, at all levels of the risk curve. And Middle Eastern investors never really left. The only ones I haven’t seen so far in this cycle are the Australians.’

Beyond the Big Three, smaller markets are also gaining traction. Total investment volumes in the Dutch office, industrial and retail markets has jumped from €1.25 bn in H1 2013 to €3 bn in H1 2014, according to Savills. The figure marks a rise of no less than 147%.

With the wall of capital continuing to gain momentum, availability of product remains a key concern. But in the seventh year since the outbreak of the crisis and this last edition of Expo Real, there can no doubt that the market is becoming more dynamic. One of the catalysts for further growth of cross-border investment in Europe is the looming Asset Quality Review. ‘The AQR will shift the geographic focus of the delevering process to Germany and Spain,’ according to Cameron Spry, head of investments at Tristan Capital Partners.

The optimists in this world don’t always get it right, but as Albert Einstein said, ‘I’d rather be an optimist and a fool than a pessimist and right.’

Judi Seebus
Editor in chief