Investment in European real estate got off to a flying start in the first quarter of 2022 before declining amid economic uncertainty in Q2.
Despite weakening activity in Q2, the robust Q1 propelled investment to the strongest ever first half of a year, according to preliminary data from global real estate advisor CBRE.
Total investment volumes reached €152 bn in H1 2022, up 10% on the year-earlier period and exceeding the previous best start to year of €151 bn in 2018.
The record first half was driven by €84 bn of investment in Q1, the second strongest first quarter result after the record-breaking Q1 of 2020.
Q2 volumes declined 11% to €68 bn, as increased borrowing costs and economic uncertainty slowed investment activity, CBRE said. Real estate pricing has been impacted by high inflation across the globe and central bank rate increases. The European Central Bank (ECB) is expected to increase interest rates for the first time since 2011 next week.
Although overall Q2 volumes declined, some markets bucked this trend and even booked records, CBRE’s figures show.
Ireland (+47%) and Belgium (+134%) both posted record Q2 volumes, with investment in Ireland being driven by the Hibernia REIT portfolio deal which saw €1.3 bn of office, residential and industrial assets transfer to Brookfield Asset Management. Italy (+53%), the Netherlands (+37%), Spain (+44%) and France (+24%) also posted higher volumes during the quarter.
For the 12 months ended 2022 Q2, investment volume totalled €377 bn, with most European countries witnessing growth over this period, the adviser said.
In terms of sectors, European office activity increased by 19% over the first six months of 2022, while industrial & logistics was up by 15% year-on-year. Residential volumes were down by 10%. European retail volumes were up by 54%, driven largely by a major portfolio sale in Spain.
Chris Brett, managing director, EMEA Capital Markets, CBRE commented: ‘Despite higher borrowing costs, investors retain a strong appetite for commercial real estate, particularly as a partial hedge against inflation.’
