European investment volumes rise 7% between 2010 and 2011

The volume of commercial property investments traded in the main Western European markets rose by 7% between 2010 and 2011, according to a report by international adviser BNP Paribas Real Estate.

Total investment volume in 2011 amounted to EUR 38.7 bn in the nine primary markets studied by BNP Paribas Real Estate, revealing a 7% increase compared to the previous year.

Following a positive start to 2011, which saw a 21% rise during the first six months, activity during the second half of the year saw a sharp slowdown compared to the same period in 2010.

The usual buoyancy during the last quarter of the year was observed in Central Paris and Munich which realised 42% and 45% of their yearly turnover during Q4. Likewise, Madrid recorded 51% of 2011 total investment volume during the last quarter but remained down on 2010 results.

Accounting for 70% of total investment, offices continued to be by far the most favoured asset. However, while offices’ turnover rose by 5% between 2010 and 2011, it increased by 33% in retail premises and remained way above the long-term average. Sustained by investors’ undiminished demand for prime assets, commercial real estate yields continue to stay at a low level.

Due to the collapse in confidence triggered by the sovereign debt crisis and the widespread fiscal consolidation measures that were introduced, it is likely that the euro area economy will be stagnant in 2012. Indeed, following the slight 0.2% GDP growth recorded in Q3 2011, the euro area is expected to enter a short period of recession which may last through the first half of 2012.