European commercial real estate (CRE) investment activity fell by 14% year-on-year in the first quarter of 2016, as a result of a nosedive in the major markets, according to Cushman & Wakefield’s latest market report.
European investment activity totalled €45.6 bn in Q1 2016, which was 14% down on Q1 2015, and 15% below the three year quarterly average. Volumes on a rolling annual basis totaled €276.5 bn at the end of Q1 2016, 6% lower than Q4 2015. The slow down provides evidence that the market is taking a pause after a record-breaking 2015.
'Despite an underwhelming first quarter, investment activity continues to grow across Europe on a year on year rolling annual basis,' said Nigel Almond, director in Cushman & Wakefield’s Capital Markets Research Team. 'The UK, continues to attract the biggest share of activity, however this share has ebbed away as investors explore opportunities in other locations. As such, the strongest growth in volumes has been located elsewhere in Europe.'
Of the major markets, UK investment suffered somewhat amidst Brexit fears, volumes of €13.9 bn for the quarter were 30% down on Q1 2015. The decline in volume invested however was not disastrous, as the amount is in line with the long term 10 year quarterly average.
After a strong first quarter of 2015, French volumes were 47% lower at €3 bn for the quarter. German investment volumes were also down 18% on the same period last year with €7.9 bn invested, however a strong deal pipeline and continued investor appetite suggests a momentary pause.
Outside of the core markets of France, Germany and the UK, volumes grew by 15% to €21.6 bn, highlighting the strong rate of recovery across the rest of Europe. Notably growth has continued in the Southern European markets of Italy (+43% to €1.5bn) and Spain (+22% to €3.4bn).
Volumes in the Netherlands were up 43% to €2.5 bn, reflecting stronger investment appetite as the market continues to transform, partially through the work out of legacy debt positions. In the Nordic markets of Sweden and Finland investment in the first quarter of 2016 was up on the previous year (22% and 285% respectively).
Activity continues to grow across CEE markets, with close to €7 bn invested in the region in the 12 months ending Q1 2016, a 7% rise on the year to Q1 2015. Although below the 23% growth for Europe overall, Poland stood out with volumes rising over 55% in the same period, where annualised basis volumes were over the €4 bn mark for a second consecutive quarter for the first time since 2007 to underscore the increased attractiveness of the region to investors.
With overall investment down in the quarter, capital flowing from all sources also fell, although the largest drop was in non-European sources, which was 29% below the level of Q1 2015 at €9.6 bn. European cross-border investment was down 11%, whilst domestic investment fell by 9%.
