Commercial real estate trading in Europe burned red-hot during the first half of this year, putting it on course to eclipse the record €295 bn volume attained in the last boom year of 2007, analysis by research firm Real Capital Analytics (RCA) shows.

Commercial real estate trading in Europe burned red-hot during the first half of this year, putting it on course to eclipse the record €295 bn volume attained in the last boom year of 2007, analysis by research firm Real Capital Analytics (RCA) shows.

RCA recorded €135 bn of investment activity in the first six months of the year , a 37% rise compared with the first half of 2014. Activity levels and volumes are on an upward trajectory: growth in Q1 this year continued into the second quarter, when there was a 16% rise from the same period a year earlier to €65.5 bn.

The research indicates that the upturn is being driven by 'unprecedented transaction levels' in London, plus strong increases in the Nordic region, the Iberian peninsular and Italy.

The €135 bn performance in the first half is not far off the €163 bn recorded in the first half of 2007, the final months of the last real estate boom. To match the full-year 2007 figure, volumes for the second half of 2015 would have to exceed €160 bn.

Simon Mallinson, RCA’s managing director for EMEA & APAC, said: 'Europe may surpass the record set in 2007 as real estate continues to attract a broad range of investors looking for higher yielding assets. Eight years ago, activity slowed in the second half [of the 2007] as the credit crunch began to bite and escalated into the full-blown Global Financial Crisis. Historic low interest rates, reduced levels of leverage and the broadening investor base mean that market conditions are currently very different from then.'

Portly portfolios
A string of substantial portfolio sales propelled investment in London to €28.9 bn in the first half, an 86% rise from a year earlier, enabling it to overtake New York City as the world’s top destination for real estate investors. Notable transactions included Brookfield and Qatar Investment Authority’s €3.6 bn takeover of the Canary Wharf estate as well as QIA’s purchase of three luxury hotels – The Berkeley, Claridge’s and The Connaught – for an estimated €2.2 bn.

The British capital is head and shoulders above any of its rivals as the destination of choice for real estate investors in Europe, RCA’s first-half data show: London racked up the equivalent amount of investment to the seven next most active cities combined. London is also the world’s biggest real estate market for cross-border investors, attracting almost four times more capital than next-placed Manhattan Island in New York, RCA’s research shows.

Large portfolio purchases also fuelled the 63% increase in investment in the Nordic real estate markets, which registered €15.5 bn of transactions in the first half. These included Citycon’s €1.47 bn acquisition of Norway’s second-largest shopping centre owner and manager, a Starwood Capital fund’s purchase of a portfolio of properties in Sweden and Norway for a sum in excess of €1 bn and Partners Group’s €423 million purchase of 30 retail properties in Norway.

There was almost a six-fold increase in activity by value in Norway in the first half from a year earlier as a result of these large transactions. Denmark and Finland each had more than a 60% growth in investment activity, although Sweden dipped 7%, RCA data show.