Investment in European property continued to gain momentum in Q3 with the return of big-ticket deals in major markets across the region, according to the latest market snapshot for Europe, the Middle East and Africa (EMEA) released by Colliers International.
Leading cities including London, Milan, Paris and Frankfurt saw major single-asset deals in the July-September quarter, as investor confidence rebounded further from a slow start to the year. Prime office assets located in the centres of national capitals remained the major draw for investors seeking secure repositories of value.
‘The vaccination roll-out across Europe has unlocked international travel and allowed more buyers to physically inspect potential acquisitions,’ said Luke Dawson, managing director, EMEA Cross-Border Capital Markets. ‘This has done a lot to improve confidence levels and encouraged investors to act on the opportunities emerging across markets and asset classes.’
Logistics assets remained a key area of focus amid steady growth in e-commerce and the supply chain constraints highlighted by the pandemic. While investors remain cautious on hard-hit retail and hospitality properties, activity is beginning to pick up in these sectors in markets like Spain. This uptick can be attributed to investors realising that as holidaymakers and business travellers return some hotel assets could be undervalued and offer a good investment opportunity now. Both retail and institutional investors continued to demonstrate strong interest in residential and particularly build-to-rent (BTR) assets in urban areas throughout the region.
Moving into Q4, Colliers predicts markets will remain active, with investors watching for any upsurge in Covid cases in the winter months. Also, on the investment radar will be the outcome of coalition negotiations in countries that have held recent elections such as Germany and the Czech Republic, amid mounting scrutiny of investment in the residential market in cities such as Berlin.
Regardless of short-term trends, overall sentiment is expected to remain positive as the new year approaches. ‘Investors clearly believe the tide has turned,’ said Richard Divall, director - Cross Border Capital Markets. ‘They are adjusting their strategies for a return to healthy economic growth and a focus on sustainable development that will shape regional property markets for the better in the years ahead.’
Allianz megadeal
Allianz’s acquisition of Tower 1 of the Four development in Frankfurt for some €1.4 bn represented the largest single-asset transaction in Germany so far in 2021. Offices have no competition as the dominant traded asset class in Europe’s biggest economy, representing 50% of all deals. Retail assets trailed far behind, with 16% market share.
France’s regional cities are seeing a surge of capital into logistics and commercial assets, with a marked presence of foreign investors. While overall transaction volumes through Q3 are down on last year, the number of transactions has shown less of a decline, as the market has refocused on smaller deals, particularly in the €50 mln to €100 mln bracket.
