European investment in commercial real estate fell 12% in H1 2016 compared to the year-earlier period to €109 bn, according to broker Cushman & Wakefield.
The total volumes for the first six months reflected a 35% decline in deals in the UK, Europe's biggest market. However, overall investment volumes across Europe rose to €56.8 bn in the second quarter, a 9% increase on the first three months of the year.
Concerns over the Brexit vote and uncertainty surrounding the eventual referendum outcome were significant factors in curtailing the volume of trading in the UK to €32 bn for H1, the advisor said.
Nigel Almond, head of EMEA capital markets research at Cushman & Wakefield, commented: 'After excluding pan-European portfolios, activity across continental Europe continues to shine with volumes in the first half of 2016 reaching €77 bn, a 3% increase on the €74 bn recorded in the same period last year.' He added: 'Despite seeing a rise quarter-on-quarter in Germany, volumes for the first half of the year reached €18 bn, a 26% drop on H1 2015. France saw modest growth of 2% over the same period.'
In Sweden, investment activity reached €10.6 bn for the first six months of 2016, after the country registered its highest ever quarterly volumes at €7.3 bn. Sweden surpassed France for the quarter and for the half year, and has already exceeded the €10 bn traded in the whole of 2015. Siginificant deals included Castellum's purchase of the Norporten portfolio in Sweden for over €2 bn.
Significant growth in CEE
Central and Eastern Europe (CEE) also recorded significant investment growth to surpass €4 bn in the first half of 2016, a 60% increase year on year.
Cushman said that across Europe as a whole, 19 of the 29 markets tracked recorded an increase in H1 2016 volumes compared to H1 2015. Domestic investors accounted for 61% of activity, the highest H1 result since 2013, with significant growth in France, Germany and Sweden.
Non-European investor activity fell to 21%, compared to levels of almost 30% recorded in recent years. These volumes came from globally-sourced funds, as well as the US, Singapore, South Africa and Hong Kong.
Non-listed funds remained the most active buyers in Europe, but 24% of investment volumes came from private companies and individuals, particularly targeting the UK, Germany, Sweden and the Netherlands.
Cushman said that the impact of Brexit was greatest in the UK, but although some deals in the market at the time of the vote have fallen away, the majority continue to progress, especially across Central London compared to the rest of the country.
Stephen Screene, CM Investment Sales at Cushman & Wakefield, added: 'Across Europe as a whole there appears to be minimal impact from Brexit with a number of major portfolio sales progressing. As such, we expect the trends in the first half to hold firm in the second half of the year, with continued growth in activity across the Continent with some capital displaced from the UK and focused more on Germany and France.' He concluded: 'This being said, despite the growth we have seen on the Continent, this is unlikely to offset a weaker UK, leading to a reduction in the volume of trading across Europe this year.'
