Risk aversion remains across Europe: DTZ

Commercial real estate investors across Europe show little willingness to move up the risk curve, according to DTZ's latest European Quarterly report. Over the third quarter, commercial real estate investment activity remained focused on the main liquid and transparent markets of Western Europe.

Magali Marton, head of Continental Europe and Middle East Research at DTZ said: 'As both economies and leasing markets remain fragile across Europe, investors remain focused on good-quality assets with long-term secure income, predominantly in core Western European markets - notably the UK, Germany and France. However, activity largely remains thin across the emerging markets of Central and Eastern Europe where the perceived risks are greater.'

Many investors have retreated to their domestic markets. This trend is particularly noticeable across the UK, where UK investors have almost completely withdrawn from European markets in the past few quarters and focused their activity on the UK. During Q3, UK investors acquired EUR 3.5 bn of assets (26% of all market activity), with the bul;k, or 97%), in the UK.

The depreciation of sterling coupled with the lagged re-pricing of assets in some Continental European markets have been key factors in restricting activity by UK investors to their home market. German investors were also particularly active, investing EUR 2.3 bn into the market during Q3, representing 17% of all acquisitions. Nearly half of this (EUR 1.1bn) was invested domestically.

Cross-border investment totalled just over EUR 6 bn (about 40% of activity), although this included two major (EUR1 bn-plus ) deals: Blackstone's EUR 1.15 bn acquisition of a 50% stake in Broadgate in London and the acquisition by a RREEF-led consortium of a portfolio from Spain's BBVA bank for EUR 1.15 bn. Overall, 60% of all foreign investment was directed towards the UK.