Large size deals reaches three-year high in Q4

European commercial real estate investment activity jumped in the final quarter of 2010 to EUR 38.6 bn, representing a 57% increase compared to the third quarter (Q3) of 2010, fuelled by strong growth in the number of large transactions being completed.

The latest data by CB Richard Ellis (CBRE) uncovered an increase in the average size of transactions in Q4 2010. In total, there were 79 individual transactions of more than EUR 100 mln concluded during the quarter - the highest quarterly total since the first quarter of 2008. The trend was even more evident for the very largest transactions, with more deals of over EUR 500 mln completed in Q4 than during the rest of 2010 put together.

This rise in the number of large transactions is significant in that it illustrates several growing influences and trends in the European real estate market: the number of active investors with sufficient equity to transact deals of this size without substantial amounts of debt; and the geographic concentration of liquidity for large transactions.

Significantly, nearly two thirds of all the EUR 100 mln-plus deals completed over the last two years have been in the UK, France or Germany. Furthermore, at a city level, London and Paris dominated these larger transactions, with no other individual city recording more than 10 transactions of more than EUR 100 mln over the last two years.

'A feature of the boom was the high proportion of total investment turnover that was in very large lot sizes - and the absence of these deals was equally prominent during the downturn. Changes in the market's willingness to transact deals of this size are a further sign of investor confidence in the real estate market,' said Michael Haddock, director of EMEA Capital Markets Research, CBRE.