Foreign Investors Lead European Commercial Surge

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The total value of commercial real estate investment activity in Europe grew 22 percent during the second quarter from a year earlier, led by North American and Middle Eastern investors, according to the latest data from CBRE Group.

Investment activity reached €32.6 billion (US$42.4 billion) during the second quarter, representing the highest second quarter total since 2007. 

In the first half of 2013, foreign buyers accounted for 44 percent of all transactions by volume, compared to 40 percent in the second half of 2012.

The source of cross-border investment has shifted from intra-European to outside Europe, CBRE says. Non-European investors accounted for 28 percent of all transactions during the first six months compared to 19 percent during the second half of 2012. 

Buyers from North American, mostly from the U.S., increased their investments during the first half of the year. The group represented 13 percent of the entire market and 24 percent of cross-border transactions during the time period. Likewise, Middle Eastern investors also increased their activity, representing nine percent of the entire market and 21 percent of cross-border transactions during the first half. 

Direct institutional investment, led by sovereign wealth funds, pension funds and insurance companies, has grown from nine percent in 2007 to 26 percent of the total market during the first half of 2013. 

"The institutional groups invested more in absolute terms in H1 2013 than in H1 2007, just prior to the financial crisis, despite the fact that investment market revenue in H1 2007 was nearly twice that recorded in the last six months," Jonathan Hull, head of EMEA Capital Markets, CBRE said in the release. "Coupled with the growth in lending activity by institutions, this illustrates the substantial increase in real estate allocation by institutional investors."

While foreign commercial investment grew, Europe also reported an increase in large transactions. In the first half, 134 commercial investment deals of €100 million (US$130.0 million) or more accounted for 47 percent of the total revenue, compared to 28 percent in 2009.

"It has long been the case that buyers from outside the region are focused on larger than average assets and H1 2013 was no exception," Mr. Hull said.