France excels as European real estate investment booms in Q3 - CBRE

European commercial real estate attracted €62 bn of investment activity in third quarter of 2015, slightly down on the previous 3 months but up 18% on the third quarter last year, according to CBRE.

France, usually the weaker of the big three western European markets compared to the UK and Germany, turned in the most noteworthy performance. The Gallic market chalked up €7 bn of investment in Q3, almost double the result in the comparable period in 2014.

The largest deals tracked by PropertyEU Research during the period included Patrizia Immobilien purchasing a residential portfolio of almost 1,000 apartments from CBRE Global Investors in its first major transaction in France.

Around the same time US Group Northwood Investors signed an agreement to acquire the 59.78% stake held by Commerz Real's HausInvest fund in Parisian office REIT, Cegereal. Cegereal owns a €960 mln portfolio comprising a total of 125,000 m2.

On 8 September US logistics giant Prologis acquired five buildings totalling 137,440 m2 in Marseille for an undisclosed price.

Germany
Germany also performed strongly and ended with a volume of €5.6 bn in Q3 2015. Major deals included private equity firm Kildare Partners acquiring a €700 mln German commercial real estate and debt portfolio from GE Capital Real Estate for an undisclosed amount. In another deal, Swiss insurance firm Zurich purchased the newly completed Berliner Tor Center (BTC) in Hamburg from a fund managed by Morgan Stanley Real Estate Investing (MSREI) for an estimated €270 mln.

Norway's volume of €3.1 bn was more than double the level in Q3 2014. One of the largest deals in this market involved Oslo-based property firm Schage taking full control of Salto, Norway's fourth-largest shopping centre group, in a transaction reflecting a gross asset value of NOK 5 bn (€550 mln).

In contrast to most other markets, investment activity in the UK fell by €2.3 bn to €18.8 bn in Q3, a fall that is even more marked when measured in sterling.

Jonathan Hull, managing director, EMEA Capital Markets at CBRE, commented: 'We have seen good growth across the European commercial real estate investment market in the last quarter. With high levels of transactions expected in Q4, this current trend is set to continue and we believe we will see a strong year-end in terms of investment volumes.'

Retail recorded the strongest levels of investment growth in Q3, up 45% on Q3 2014, he added. 'This is the second highest level we have seen in 10 years of data. The office sector also performed well across the region, underscored by some significant transactions in France, the UK, Norway and Sweden.'

Yields
Yields conntinued to move downwards, with substantial falls in several major markets in Q3. Notably for all three main sectors the weighted average is now below its value in Q3 2007 – the pre-crisis low.

The All Property average is down by 46 bps over the last four quarters and the rate of decline has accelerated in 2015, despite the growing expectation that short-term interest rates might finally start increasing in the next few months. There are also some signs that the relationship between prime and secondary yields is stabilizing. The prime-secondary spread had been closing rapidly since the end of 2013, but in the last two quarters it has been relatively stable.