European real estate investment drops by 60% in Q3 - JLL

Direct commercial real estate transaction volumes across Europe in the third quarter of 2008 continued to trend downwards, according to Jones Lang LaSalle (JLL).

Totalling EUR 25 bn, investment activity in the third quarter was 19% below the second quarter (EUR 31 bn) and 60% down on the third quarter of 2007 (EUR 63 bn). For the year to date, European commercial real estate investment totals EUR 94 bn, down 50% on the corresponding period in 2007.

Only three markets (the Netherlands, Sweden and Russia) recorded an increase in volumes compared to last year. The slowdown between the second and the third quarter was most pronounced in some of Europe's smaller markets including Ireland and Belgium where volumes fell by 70% to EUR 45 mln and by 54% to EUR 550 mln respectively. Volumes were also significantly lower over the quarter in Italy (-48%) and France (-30%).

While volumes in the UK slowed by 29%, the market remained Europe's most active in the quarter with EUR 5.7 bn of direct transactions. Along with Germany which was down 9% at EUR 3.2 bn, it accounted for over a third of European investment transactions over the period. The Netherlands and Finland were among the few markets that showed growth over the quarter with volumes increasing 40% to EUR 2 bn and 56% to EUR 585 mln respectively.

'Expectations for full-year 2008 direct real estate volumes will be conditioned by the excessive turbulence in the world's financial markets in the past three weeks with bank bailouts and government intervention on a massive scale, together with the scale and speed of falling real estate values and concerns over the fundamentals looking into 2009 - 2010,' said Tony Horrell, head of European Capital Markets at JLL.

'We are expecting direct real estate investment volumes to reach close to EUR 115 bn in 2008, but are yet to issue guidance on 2009 and beyond, other than to say we foresee opportunities aplenty for a wide spectrum of investors if they can avoid or insulate themselves sufficiently from the very real problems of refinancing, distress, and falling values that will afflict many investors and be a feature of the next 18 months at least.'