European commercial real estate recorded its strongest quarter of the year in Q4 2016 with investment volumes reaching a record high of €86.8 bn, according to new data from CBRE.
The total represents a 5% increase on Q4 2015, which held the previous record for investment volumes. A particularly buoyant German market provided a significant boost to the European total, with volumes reaching a record of €19.8 bn in Q4 2016. The Netherlands also saw the largest ever year-on-year growth with investment up 17% on 2015 to €13.5 bn.
'Continental European markets continued to perform strongly in the latter half of 2016 with investors prepared to pay a premium to secure the best product. Germany maintains its position at the top of investors’ wish list for core property assets and is likely to continue to be seen as safe haven for global capital,' commented Jonathan Hull, managing director of Investment Properties, EMEA at CBRE.
Overall, total investment activity in 2016 reached €251.1 bn which was a 10% decrease on 2015.
A weaker start to 2016, coupled with uncertainty in the UK surrounding the EU referendum and other global factors reduced capital flows, according to CBRE, although investment volumes in industrial real estate outperformed every other sector with a 4% increase with respect to 2015.
Sentiment picked up significantly in the second half of 2016, and investment levels for most of Europe were generally either stable or up on 2015. Commercial real estate investment in Spain and the Netherlands were particularly resilient. In 2016, more than €13.5 bn was invested in Dutch commercial real estate alone, surpassing the previous highest record of €13.2 bn in 2007.
Germany also performed strongly, with a record fourth quarter of €19.8 bn bringing investment turnover above the €50 bn mark for the year.
In 2016, investment in the UK market recorded a 28% decrease compared to 2015 when measured in sterling (37% in euros).
Strong UK fundamentals and the depreciation of the pound saw UK investment volumes improve by the final quarter, from €11.9 bn in Q3 2016 to €15.1 bn in Q4 2016.
'Interest and sentiment in the London market is improving and the devaluation of sterling made prime London assets particularly attractive to overseas buyers. The UK’s economic fundamentals remain strong and this will underpin investor confidence in 2017,' Hull concluded.
