European Capital Markets Bulletin: Momentum Building
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Quarterly investment turnover in European commercial real estate markets has stabilised, ending a trend of seven consecutive quarters of declining transaction volumes. Despite the overall traded volumes remaining low, investor activity has continued to pick up noticeably throughout the year and to a greater extent than suggested by the transaction evidence alone.
European commercial real estate investment volumes in the first half of 2009 stood at €24 billion. This was down 42% on the previous half year (H2 2008) and down 67% on the same period in 2008. Despite the decline in half year numbers, quarterly volumes were marginally up, with each quarter of 2009 recording around €12 billion in transactions. The number of deals was also broadly the same in each quarter with 393 deals in the first quarter and 425 in the second. The stabilisation is a significant shift in the market, as for the past seven quarters transaction volumes had been declining by an average quarterly rate of 22%.
London is currently the most active market in the world for direct commercial real estate investment. The reasons remain the rapid and deep correction in pricing, the ability to acquire prime properties, liquidity, transparency, the perception of an undervalued Sterling and London’s continued standing as the business capital of Europe.
Paris is now firmly in the sights of international investors. Back in February, London was seeing a discernable increase in property inspections and multiple bids for prime assets. In Paris we are now seeing a definite uptick in buyer enquiries and the best assets generating interest from multiple parties.
In markets where there has been an increase in investment appetite, demand far exceeds the available supply of prime well let assets, encouraging some investors to look at near-prime and regional cities.
We expect transaction volumes to pick up in region moving into the second half of the year in almost all major markets—although some markets will remain out of favour. London has demonstrated that demand can ramp up very quickly once investors gain confidence and markets re-price. Investors who are looking at Continental Europe should take note that in the space of just a few months the London market has become a very crowded one with too few good buying opportunities. Paris is set to become the next market in Europe to see a mini investment rally and indeed this has already begun.
Click here to read our complete review of H1 2009 transaction activity and our outlook for the rest of the year.
To speak to us directly about capital markets opportunities in the European Region please contact Chris Staveley. To speak to us directly about our research capability and in depth market views please contact Nigel Roberts. To speak to us directly about the content of this report please contact John Gardiner.