European investment jumps 54% in Q1 as recovery gathers pace - RCA

European commercial real estate investment registered its most active start to the year since 2007 with transaction volumes of €64.3 bn, a 54% rise in the first quarter compared with the same period last year, analysis by research firm Real Capital Analytics (RCA) shows.

Real estate’s attractive returns relative to other investment asset classes and signs of economic recovery drew more global investors to the European market between January and March.

The figures also showed that for the first time in eight years cross-border investment made up more than half the total volume, with €35.7 bn or a 55.5% share.

Capital from outside the region accounted for 30% of property purchases with 116 new investors, such as Israel’s Ariston Group, making their first acquisitions in Europe.

'Europe’s markets go from strength to strength as investors, particularly from outside the region, perceive it [property] as offering attractive returns relative to other asset classes – property in the Eurozone currently yields 600 basis points more than 10-year government bonds. Eurozone periphery countries continue to attract attention, with notable pick-ups in Italy and Portugal,' said Tom Leahy, RCA’s director of EMEA Analytics.

Italy registered almost a fivefold leap in transactions to €3.75 bn to become the continent's sixth most active investment market, lifted in part by QIA’s €1.2 bn buyout of its joint venture partners in the 28-building Porta Nuova development in central Milan. The first three months of 2015 were the strongest first quarter for Italian commercial real estate investment since at least 2007. Portugal recorded an almost 14-fold surge from a low base to €623 mln, RCA’s data show.

The periphery of the Eurozone has seen the biggest increase in investor demand during the past 18 months. Transaction volumes in Spain more than doubled in the first quarter of 2015 to €2.83 bn, 72% of which centred on Madrid. Ireland, one of the first periphery Eurozone real estate markets to register a recovery in investment, had a 16% increase in transactions by value to €1.06 bn.

RCA’s Tom Leahy added: 'Italy and Portugal are starting to feature on investors’ radar as they look for the next opportunities in the Eurozone periphery created by the ongoing bank deleveraging and attractive pricing.'