European investment activity slows further in Q4, says CBRE

European commercial real estate investment slowed down further in the fourth quarter of 2008, with total volumes reaching EUR 19.5 bn, according to research by international property services firm CB Richard Ellis. This represents a 30% decrease on levels of EUR 27-28 bn registered for the second and third quarter of 2008. The total turnover for 2008 is around EUR 116 bn, a level comparable with that registered in 2004.

Almost every market saw a decline in activity compared to the third quarter of 2008. The contrast between the third and fourth quarters was heavily influenced by the collapse of Lehman Brothers and the deepening of the credit market turmoil, which had a negative impact on investor confidence. Furthermore, by the end of the third quarter, the credit crunch had taken its toll on the broader economy, with many European countries slipping into negative economic growth and 2009 forecasts signalling recession.

The fourth-quarter results were boosted by a number of significant deal closures just before the year end. Amongst those were a few notable transactions, including the EUR 990 mln HSBC buyback of 8-16 Canada Square in London and sale-and-leaseback portfolio disposals by two of Italy's major banks, Banca Intesa and Unicredit Group, together amounting to EUR 1.65 bn. Powered by these transactions, Italy saw a sharp increase in investment activity compared with the third quarter. Most other countries, however, saw decreased investment activity for the quarter, with the exception of France and Germany. Equity and institutional buyers, which were the dominant players in 2008, will remain key for the real estate investment market in the near future, CB said.

Michael Haddock, Director of EMEA Capital Markets Research, CB Richard Ellis, said: 'There was quite a sharp rise in prime yields across Europe in the final quarter of 2008, averaging between 30 and 40 bps. This will go some way to closing the gap between buyer and seller pricing expectations and set the stage for higher levels of activity in 2009.'