European investment slows amid debt concerns: CBRE

European property investment activity slowed to EUR 25 bn in the second quarter of 2011, reflecting growing uncertainty in Europe as a result of the continuing sovereign debt crisis, according to the latest data from CB Richard Ellis.

Property investment turnover amounted to EUR 28.4 bn in Q2, down 12% on the Q1 2011 total and 3% lower than the same period last year (EUR 25.7bn). The main driver of the quarterly decline was a reduction in activity in the UK, where turnover fell by almost 40% versus Q1 - from EUR 11.4 bn to EUR 6.8 bn. Compared with Q2 2010 (EUR 10.3 bn), UK investment turnover fell 34%. Italy and Iberia also showed a quarterly slowdown, reflecting growing concerns over government deficits and the impact of austerity measures on economic growth.

CBRE's research shows the strongest growth in property investment activity was in the more robust economies such as the Nordics. Finland in particular saw a significant boost in activity in the second quarter of the year.

Pricing for core assets across Europe continued to tighten and the CBRE EU-15 All Property Yield Index fell a further 6 basis points in Q2 to 5.48%. One effect of the substantial downward shift in prime yields in Western Europe is that investors are increasingly seeking value-driven investments in Central and Eastern Europe (CEE), CBRE said. The momentum that has built up in the CEE region in the past year was maintained in Q2, with EUR 2.6 bn turnover, over 50% of which was attributable to the Russian market. Retail investment was particularly strong across CEE as a whole, although primarily driven by activity in Russia and Poland.

Jonathan Hull, head of EMEA Capital Markets at CBRE, commented: 'We continue to see a strong desire to invest in core markets; however, property investment activity in Europe slowed this quarter which partly reflects economic uncertainty across Europe. The absence of a clear-cut solution to the sovereign debt crisis in Greece and growing concern over risk in other countries will continue to influence investment decisions in the near term.'