Commercial property investment in Europe has reached its highest level since 2007 and is on course to hit €230 bn by the end of the year, according to half-year analysis by Savills.
Commercial property investment in Europe has reached its highest level since 2007 and is on course to hit €230 bn by the end of the year, according to half-year analysis by Savills.
A surge in cross-border investment has driven the rise in activity, with US equity funds and investors from Asia Pacific and the Middle East targeting the European market. Savills also noted a trend towards large transactions in the form of portfolio deals and acquisitions of landmark office buildings.
The total investment volume across 16 countries in the European Investment Briefing totalled €102.5 bn in H1 2015, up by 25% on the previous year and the largest figure for a six-month period since the 2008 crash.
Investors continue to favour core markets, with the UK, Germany and France taking up 67.8% of the total volume, but there are signs that investment strategies are diversifying, with growing interest in non-core countries and secondary cities. In all countries regional markets took up more than half the total volume.
‘Overall, investors are more open to move up the risk curve,’ said Lydia Brissy, director at Savills’ European research team. ‘They seek future yield compression by targeting secondary or alternative assets in core cities, or prime assets in secondary markets.’
Cross-border investment increased in nearly all European countries, with a concentration in peripheral markets. Portugal recorded a 720% rise in H1 2015, driven by an influx of US capital which accounted for 93% of foreign investment in Q2. Non-domestic investment also accounted for more than 80% of the total in Italy and Poland.
The office sector dominated the market across Europe, capturing around 39% of the transaction volume on average, though the return of retail portfolio transactions put the sector ahead in Germany (42%), Finland (43%), the Netherlands (43%), Norway (62%) and Portugal (83%).
Marcus Lemli, head of European investment at Savills, said: ‘With healthy investor interest, Europe has seen a shift towards larger transactions. The most significant rises in portfolio deals were noted in Germany and the Nordic markets and consequently, there has been a marked uplift in activity in the regional markets.’
He added: ‘There is certainly potential for increasing investment volumes in the context of low interest rates, availability of finance and generally better economic conditions. We are therefore forecasting an increase of at least 10 to 20% in commercial investment activity this year and further yield compression for two thirds of our markets.
‘I have no doubt that, despite current unease surrounding the an economic slowdown in China, investor appetite will remain high in H2 2015 as Europe continues to recover and remain an attractive place for investment.’