North Americans emerge as Europe's biggest foreign buyer

North American investors account for almost a third of all cross-border purchases in the European commercial real estate market, increasing investment activity in the region significantly in 2011, according to the latest research by global property adviser CBRE.

The increasing number of non-European buyers contributed to a rise in commercial real estate investment last year which reached EUR 118 bn in 2011 - up 7% on the year before. Non-European property investors have risen in prominence to account for over 17% of total European investment in 2011, versus 13% in 2010, with North American investors the driving force.

US and Canadian investors now account for 30% of all cross-border purchases compared with 21% in 2010. This represents the largest share of the 2011 cross-border market by quite a margin and is made up of over EUR 9 bn of US capital and a further EUR 2 bn from Canada, including Morgan Stanley's purchase of Galleria Shopping Centre in St Petersburg in the final quarter of the year for circa EUR 840 mln. US and Canadian buyers have also been active on the sell side, selling over EUR 8 bn of European real estate in the same period.

North American investment activity is spread across a number of European markets although the UK and in particular Central London offices took the largest share, at 18%. Canadian investment, in particular, is driven by its cash-rich pension funds and limited opportunities in the domestic market. Recent legislative changes to pensions have also contributed to Canada becoming a serious player in the global real estate market. Capital flowing from the US is far more diverse and more opportunistic in nature; however, US pension funds are becoming more aggressive and looking to the Canadians to model similar investment strategies.

'Canada's five largest pension funds alone control over half a trillion dollars in combined assets - the equivalent of the entirety of the Swiss economy. Canadian investors are typically long-term holders and already hold most of the key assets domestically; this limited domestic universe is leading to the need to diversify and seek opportunities abroad,' said Jonathan Hull, EMEA head of Capital Markets, CBRE.