European Investments Reach Highest Level Since 2007

European Investments Reach Highest Level Since 2007

Commercial News » Europe Commercial News Edition | By Francys Vallecillo | February 3, 2014 10:57 AM ET

Commercial real estate investments in Europe reached the highest level since the fourth quarter in 2007 during the final quarter of 2013, led by the core markets of the U.K. and Germany.

Investment volumes totalled €46 billion in the final quarter of the year, pushing 2013 investment volumes to €139 billion in 2013, increasing 17 percent year-over-year, according to DTZ Research.

The largest quarterly increase in commercial investment volumes was recorded in Germany, which increased by 88 percent to €11 billion. The U.K. followed with 31 percent to €20 billion.

On the other hand, investment volumes in France increased by a modest eight percent to reach €4.8 billion.

There was a strong rebound in peripheral countries with €3.7 billion in acquisitions during the fourth quarter, compared to a quarterly average of €1.5 billion seen in the previous three quarters, the report finds.

"Following the trend highlighted in Q3, the peripheral countries (Ireland, Italy and Spain) continued to attract investor interest and posted the biggest increase in Q4 reflecting the improved outlook for these markets," Nigel Almond, head of Strategy Research at DTZ Research, said in the report. "With €7.7 billion invested in 2013 (up from €3.6 billion in 2012), these countries accounted for 6 percent of the European volume in 2013 as a whole."

The region witnessed a return of cross-border investors during the fourth quarter, with €22 billion in investments, up from €11.1 billion the previous quarter. Non-European investors increased their investments by €7 billion, with a focus on the U.K., CEE and peripheral countries.

Unlisted funds, listed property companies and institutions continued to lead in the region, accounting for 76 percent of total investment volumes.

Listed companies became net investors for the first time since 2012, since having undertaken most of their portfolio restructuring, DTZ states. However, in the last year they have reduced their property exposure by €400 million.

By sector, the retail market enjoyed the largest year-end rush, with investments totalling €12.3 billion in the fourth quarter, a 74 percent increase from the previous quarter -- led by strong volumes in the UK (€3.3bn) and Germany (€3.8bn), the retail sector has also registered more activity in France (€1.3bn) and in Italy (€1bn).

However, office space remains the favorite form of investment, with €22.9 billion in the fourth quarter, up from €18.7 billion the previous quarter. Large European portfolio sales in the industrial segment declined at the end of the year, with investment volumes dropping 23 percent quarter-over-quarter to €2.7 billion.

"Growing institutional and sovereign capital, in particular from Asia, showed strong appetite for the European market," Magali Marton, head of EMEA Research, DTZ, said in the report. "In this context, we confirmed our forecasts with an 8 percent growth anticipated in 2014 to €150 billion."

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