The UK market dominated European activity capturing 36% of investment capital. Although economic pressures are not easing, the market remains attractive to cross border investors and consequently we anticipate that the UK will continue to dominate, although overall volumes may start to plateau.  The supply of investment stock remains the key “unknown”. It will increase as banks are in a better position to action problem loans – coupled with some indications that there is depth in demand for slightly more secondary product – but banks are not all necessarily pressured to force assets to market if alternative courses are deemed more appropriate. During 2011 we expect to see more funds targeting the UK through joint ventures with local or sector specialists. Examples include the purchase of a 50% stake in Westfield Group’s Stratford City by APG of the Netherlands and the Canada Pension Plan Investment Board in the final quarter of 2010 for more than €1 billion.

Contact: Nasima Ahmed

Investor demand for German assets strengthened throughout the year in 2010, with a strong final quarter concluding a robust 12 months. Year-end investment volumes were up 88% from levels seen in 2009, to €17.7bn. Activity within Q4 2010 amounted to €5.9bn, a level of performance not seen since Q1 2008. Germany captured 17% of European investment capital in 2010, an increase from the 14% recorded in 2009. Significant increases in activity from international investors meant that the market was less dominated by domestic purchasers. Although actual volumes generated by domestic investors increased, they accounted for only 58% of total turnover, down from the 84% in 2009. Yields have moved in across the board for both office and warehousing lots, most notably in Frankfurt. A shortage of core product in prime locations prevented transaction volumes from reaching higher levels in 2010. 2011 is expected to be characterised by the arrival of more international investors and an increased focus on higher-risk investments.
 


 Contact: Matthias Barthauer

Although activity in the French investment market declined during the crisis, it was the first continental European market to recover: investment volumes in France improved steadily over 2010, with the year-end total up 42% on 2009 figures, to €11.6bn. France continues to be an active market and is seen as a safe haven for real estate, particularly by foreign investors. Yields for good quality buildings in secondary locations are beginning to catch up with the prime market. Investor demand has been focused on the Paris region, with yields hardening by almost 100bps for office, high street retail and warehousing lots. Whilst there has been movement for assets in Lyon, yield shift has been less pronounced. Key deals in 2010 included the sale of Capital 8 – Messine, Paris in Q2 2010 by Unibail Rodamco to Allianz Real Estate for €244 million.

Contact: Jean-Luc Blanplain

Investment volumes within the Nordic region rebounded dramatically, especially during the final quarter of 2010, rising 177% to €5.6bn, a level of activity not seen since Q1 2008. The year-end investment volumes total for 2010 in the Nordic region stands at €12.5bn, a 76% increase on figures seen in 2009. The improved economic outlook and positive knock-on effects in the occupational markets meant that vendors were becoming more active. Increasing investment volumes were driven particularly by Norway and Sweden, which both recorded significant increases in trading activity over the year. Buyers were primarily domestic unlisted property companies or institutions, seeking product let on long leases in prime locations. There was growing interest from unlisted foreign funds, however, which accounted for almost 10% of overall activity. This has driven yield compression across all sectors throughout 2010 but we anticipate a more stable outlook in 2011. Key deals included Sweden’s largest ever single real estate transaction: the sale of Blamannen 20, a retail and office asset sold to Vasakronan, a property company owned by four Swedish pension funds for €483m.

Contacts: Tero Lehtonen, Asa Linder

Investment volumes in the Netherlands also showed signs of recovery over the second half of the 2010. Although the share of investment captured by the Netherlands fell as investors began expanding their horizons, absolute investment volumes increased 13% to €4.6bn. Demand was derived predominantly from domestic investors, who accounted for 72% of all transactions last year. This was driven by the sale of two shopping centres by Unibail-Rodamco for a combined value of €363m in separate transactions to Dutch purchasers – REIT Wereldhave and unlisted fund Altera Vastgoed.

Contact: Ruben Langbroek

The sovereign debt situation continues to dominate sentiment surrounding the Spanish market, with fears concerning the ability of government to repay debt as interest rates rise and of write-downs for bond holders. If a rescue package has to be initiated this would consume the majority of the European Financial Stability Facility, which would impact stability elsewhere in the Eurozone. Investment activity last year in the Spanish markets was down 14% in comparison with 2009. Most cross-border investors remained cautious about investing in Spain, but there are some opportunistic funds seeking to take advantage of relatively generous yields on core assets. Examples of cross-border transactions include the sale of the Ballonti shopping centre by Eroski to DEKA and the sale of BBVA’s Bilbao HQ to the Spanish pension fund Mutualidad de la Abogacia by RREEF for €100m. 

Contact: Olga Hornillos

Investment volumes improved slightly in comparison with 2009, up 7% but remain between 40-50% below the peaks recorded in 2006 and 2007. The market has been dominated by domestic investors, particularly domestic funds, which accounted for 40% of total transaction volume. There was little cross-border activity, with international investors purchasing just €0.9bn. Through 2011 scarcity of core product in markets such as London and Paris will drive an increase in international investor activity in this market. Prime yields have remained relatively keen in the Italian markets and as a result there has been limited movement. A perceived increase in investor appetite in the offices segment resulted in a 15 bps inward movement over Q4 in both Milan and Rome but yields for all other sectors have been stable. 

 
Contact: Raffaella Pinto

Investment volumes in Poland, Hungary, Romania and the Czech Republic rebounded in 2010 from the low levels seen previously, increasing 62% to reach €3.1bn by year-end. Poland continued to be the outperformer in the region, with volumes accounting for 56% of the total for Central Europe, followed by the Czech Republic at 26%. Poland continues to receive sustained interest from investors, with its strong GDP growth, an educated and expanding workforce and rising sales figures. Poland is starting to redefine itself as a ‘core’/developed European country for investors. Hungary is still experiencing some uncertainty: whilst the economy starts to show signs of repair, corporate occupiers and investors are demonstrating some caution over the political backdrop. Romania is still fragile but the recovery may surprise in 2011/2012.

Contact: Kevin Turpin

Real estate investment activity in Russia bottomed out in Q2 2009. Quarterly trends have tended to be more erratic than in other markets but the full year figure for 2009 is close to 50% of the record high in 2006, unlike many other markets which in 2009 were recording volumes 80% below their 2006/2007 peak year. Prime yields, however, have increased by 500-700 basis points from the peak of the market across all sectors, but Q4 saw the start of an inward correction in Moscow offices and high street, reflecting a readjustment from an oversold position.

Contact: Vladimir Pantyushin

Levels of investment activity within the Luxembourg and Belgium markets declined in 2010 compared to figures for the previous year to €1.4bn. The limited volume of activity was primarily due to the lack of core product on the market in the first half of the year, while the fall in comparison to last year can be attributed to several large owner occupier deals in 2009. Domestic investors accounted for 64% of transactions, with German buyers, particularly closed end funds, also significantly represented in the market. We expect increasing activity over 2011 as more lots become available and investors widen their focus to include value add opportunities. German closed ended funds are anticipated to remain active alongside increased activity from local insurance companies, as they increase their capital allocation into real estate, and further growth of Belgian REITS. A key factor driving rising investment volumes is also that banks are becoming more willing to provide loans for bigger lots, although they remain highly selective in terms of borrower track record.

Contact: Patricia Lannoije

Ireland has experienced a traumatic 24 months, receiving €85bn in financial support from the EU and IMF. Investment volumes in Ireland began to recover over the past year, increasing by 128%, albeit from a low base of €0.1bn in 2009 to €0.3bn in 2010. Only high street retail yields hardened over 2010, moving in 25bps. Conversely, yields on Dublin offices softened by 25bps in the final quarter of last year. The National Asset Management Agency (NAMA) has acquired €71.2bn worth of loans in Ireland and in the UK for €31.2bn, which should assist in the stabilisation of the real estate market by providing liquidity and longer-term funding options. There remains a deep buying community, which is a combination of domestic and foreign investors who are seeking assets across all classes.

Contact: Clare Eriksson