EUROPE - Germany, the Nordics and central and eastern Europe (CEE) will attract the most interest of cross-border European investors in 2011, while certain southern European markets will suffer, according to CB Richard Ellis (CBRE).
The company's latest research report found that investment in European real estate totalled €100bn in 2010, representing an increase of approximately 35% on the numbers for 2009.
This upward trend is expected to continue at a rate of 10-15% during 2011, but most of the investment capital will be attracted to Germany, the Nordics and CEE markets.
This is in line with findings from a survey by INREV, which placed Germany at the top of European investors' shopping lists.
The CBRE report also pinpointed Greece, Spain and Portugal as markets real estate investors would avoid over the next 12 months as stretched government finances are set to significantly impair economic growth.
Peter Damesick, chief economist for EMEA at CBRE, said: "Sovereign debt risks, volatile bond markets and fiscal austerity will be potent influences on Europe's economic weather in 2011, with clear potential for squalls and storms to affect the progress of recovery.
"With marked divergences in economic performance creating major tensions in the euro-zone, probably the most beneficial development for European economies is for Germany's impressively strong upturn to translate into higher consumer spending in the continent's largest economy and boost demand in the region as a whole."
European retail was identified as an attractive real estate sector for investors searching for prime stock in mature European markets. CBRE said this trend would continue at the expense of the office sector in Europe, with large regional shopping centres being a focus of particular attention.
Much of the €100bn recorded in transaction volumes by CRBE in 2010 came from investors buying assets within their own national markets.
But CBRE said its research suggested cross-border investment would rise in 2011, with particular importance placed on sovereign wealth funds and state pension funds, which were particularly active toward the end of 2010.
Michael Haddock, director of EMEA Research at CBRE, said: "There is no shortage of capital targeting the European real estate market, but it remains predominantly risk-averse and hence strongly focused on security of income.
"Moreover, there is no obvious catalyst for a recovery in the secondary market. The focus of activity in 2011 will be firmly on the prime end of the market."