July property investment in Europe down 20% on 2011: PropertyEU Research

European real estate investment got off to a slow start in July, with volumes down 20% on the same period in 2011, according to PropertyEU's survey of reported transactions.

PropertyEU Research tracked EUR 5.5 bn of large deals for which the purchase price was available, compared with a volume of EUR 7 bn for July 2011.

The big three European markets - the UK, Germany and France - continue to dominate and accounted for some 67% of the volume recorded by PropertyEU Research in July 2012. The list does not include deals where the purchase price was not reported or could not be independently verified.

The UK was the most active market with a total volume just shy of EUR 2 bn, with Germany in second place with a total of EUR 1 bn of large, reported transactions. Both countries were about equal in July 2011 on about EUR 1.3 bn each.

PropertyEU tracked EUR 850 mln of deals in France in July this year.

The Polish market - the biggest market in central and Eastern Europe - generated a volume of some EUR 450-500 mln during July 2012. This was largely due to Union Investment's acquisition of the Manufaktura shopping centre in Lodz for EUR 350 mln to EUR 400 mln.

Tomasz Trzós³o, head of capital markets CEE, Jones Lang LaSalle: 'We believe that the overall investment sentiment and outlook for Poland will continue to be good and, that the total investment volume in 2012 may reach between EUR 2 and 2.5 bn, compared to a total of EUR 2.7 bn in the very strong 2011.'

'At the mid-year point we estimate prime office yields to be at 6.25%, retail yields at 5.75% and warehouse yields at around 8.0%. We forecast prime yields to remain stable in the short term but, this will highly depend on how the situation in the Eurozone and the banking sector evolves over the coming months. The yield gap between prime and secondary product is 100 to 200 bps and we expect this spread to continue.'

Turkey was the next most active market in our investment snapshot, thanks to private equity firm Blackstone which acquired Gordion and Erzurum shopping centres from Netherlands-based Redevco for about EUR 200 mln.

Mixed-use was the most active property segment, accounting for EUR 1.7 bn, or 33% of the total volume recorded. Offices were in second place with a volume of EUR 1.3 bn (25%). Retail was a distant third on about EUR 900 mln in July 2012.

The drop in retail investment may be a reflection of the lack of available prime shopping centre assets caused by the slowdown in development in recent years.

Property adviser CBRE noted that while European retail investment increased from EUR 5.7 bn Q1 2012 to EUR 6.1 bn in Q2 2012, Russia was the only market to report robust transactional levels in H1 2012. That market saw four large shopping centre deals, three of which concluded in Q2 2012.

Konstantin Lysenko, director, capital markets, CBRE, Russia: 'In Russia the market dynamics are different from what we see in other European countries. In the context of limited supply of quality retail assets investors are seriously looking to buy into less liquid lower quality properties or properties located in secondary regional markets.'

Office and retail were the two most active real estate investment segments in July 2011, generating volume of EUR 3.1 bn and EUR 1.5 bn respectively, according to the data compiled by PropertyEU Research.