Commercial property deal volume rose in the third quarter of 2021 compared with a year ago and approached pre-pandemic deal activity levels, boosted by industrial and apartment sector sales, the latest Europe Capital Trends report from Real Capital Analytics reveals.
Third quarter European transaction volume climbed to €64.4 bn, a 21% increase on the third quarter of 2020 when dealmaking was impeded by Covid-19 restrictions and uncertainty.
For the year so far, total commercial property sales reached €202.6 bn, up 8% compared to the first nine months of 2020 and 5% lower than the average for the same period in the years 2015 to 2019.
Tom Leahy, RCA’s senior director of EMEA Analytics, said: 'It is clear the restrictions on dealmaking, which caused property investment transactions to fall to their lowest level for seven years in the middle of 2020, have eased. The deployment of the Covid-19 vaccine and the opening up of society has encouraged buyers to return to market and deal volumes are comparable to those recorded pre-pandemic.'
Industrial boom
Across all of Europe, investors bought €41.6 bn of industrial properties in the first nine months of 2021, a total 85% higher than the pre-pandemic average. The accelerated adoption of online shopping has spurred investor interest in the warehouses required to store and ship goods. The UK is the continent’s leading industrial market and investors spent €14.7 bn on UK industrial property in January to September.
The apartment market also flourished in the third quarter, with sales increasing to €14.3 bn, a 39% year-over-year increase. Berlin is the top apartment market in Europe for the year so far, with London in second and Copenhagen in third.
The picture was not so sunny for the office sector. Sales rose 9% from a year ago but were down by 26% compared to the pre-pandemic average. Sales of Paris offices so far this year have been subdued, falling by 34% versus 2020. Investors have pivoted away from the office and retail sectors towards apartment, industrial and certain alternative asset classes.
UK tops transaction volumes
The UK was Europe’s number one country market in terms of transaction volume for the quarter and for the year to date, and London regained its position as the top city market. London also became the top global destination for cross-border capital, driven primarily by spending from North American investors.
Germany slipped to second place in the country rankings but there are just under €37 bn of pending deals in the pipeline, including a couple of supersized deals in the residential sector. Year to date, deal volume in Germany has totaled €48.5 bn.
Nordics shine
The standout markets of the year so far were Sweden, Norway and Denmark, where deal volume surpassed pre-Covid averages. Apartment sector sales were the key driver of the increases.
Added Leahy: 'The fourth quarter of the year is typically the busiest of the year and there are some very big deals in contract that, if completed, should further buoy activity.
'However, there are headwinds that investors still have to deal with: the rise of inflationary pressures; the future of the office sector, where demand is strong for the best quality assets but much weaker elsewhere; and the possibility that governments will reintroduce restrictions to combat any winter spread of the virus.'
