Top Deals 2012: Investors cling to the core

Big Three Western European markets take 70% slice of investment pie

Cross-border investors continued to play it safe in 2012, focusing mainly on the Big Three Western European markets - the UK, Germany and France. Aside from Poland and Russia, investment dried up across Central and Eastern Europe.

Of the €80.6 bn of large deals tracked by PropertyEU Research, the Big Three accounted for 70% of the volume. The UK took the largest share (30%), followed closely by Germany (27%). ‘It is very mixed market by market,’ said Cushman & Wakefield’s head of capital markets David Hutchings. ‘Germany had a good year and the Nordics gained market share, while other markets fell backwards.’ The UK performed better than expected. C&W reported volumes of £33 bn (€39 bn) for 2012, just below the 2011 level of £33.5 bn. The main feature of the market was fewer, but larger ransactions - 1,400 deals in 2012 compared to 1,800 in 2011. Looking ahead, the broker predicts ‘more or less a continuation of the story from last year’, with London and the Nordics remaining popular and perennial favourite Germany seeing further growth. C&W’s head of UK capital markets, David Erwin, said the market had begun 2013 on a positive note but that there may be a need to take on more risk. ‘If investors are looking for stock and opportunities with above-average returns, they may have to move up the risk curve and based on current sentiment changes, we think they might, albeit cautiously. It could be a good year for non-core prime which seems to fit the bill for those seeking both income and capital growth.’ On the Continent, Germany had a bumper year, chalking up €25 bn of deals - its highest level in five years. International buyers accounted for 46% of the total investment volume, up from 31% in 2011. In December alone, approximately €4.7 bn of real estate changed hands, thanks to deals by Lone Star and NBIM (see list opposite). France saw €16.8 bn of investment transactions during 2012, marking an increase of
4.5% year-on-year, according to Savills. Marie-Josée Lopes, head of research at Savills France, noted. ‘With ongoing interest from international investors and a number of significant deals already in the pipeline, we expect the investment volume to reach between €6 and €8 bn by the end of H1 2013.’

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