European Commercial Investment by U.S. Institutions Increases 75 Percent in 2014

European Commercial Investment by U.S. Institutions Increases 75 Percent in 2014

Commercial News » Europe Commercial News Edition | By Michael Gerrity | August 28, 2014 11:22 AM ET

According to CBRE, price movements in the U.S., coupled with improving prospects overseas, have led U.S.-based investors to increase their commercial real estate acquisitions in Europe by 75% year-over-year.
Notwithstanding expanding investment volumes in domestic markets, U.S. investors significantly increased their activity in Europe in H1 2014 with $15.5 billion (€11 billion) of acquisitions, compared to more than $8 billion (€6.3 billion) in H1 2013. The U.K. attracted the majority of this investment (36%), with Germany (23%) and France (17%) also favored destinations. Ireland and Italy received over $0.75 billion (€0.5 billion) of U.S. investment.
The jump in buying activity from U.S.-based investors was the most significant shift in terms of buyer nationality in Europe, with U.S. buyers responsible for 63% of cross-regional investment in the region. Also notable, was the shift to positive net investment from U.S. investors. In recent years, sales have nearly matched acquisitions; however, in H1 2014 alone, acquisitions have exceeded sales by approximately $6 billion (€4.5 billion).
Chris Ludeman, Global President of CBRE's Capital Markets said, "While the volume of business in U.S. commercial real estate is expanding, price movements in domestic markets and improving prospects in the European economy have led U.S. investors to target Europe more ambitiously than has been the case in recent years. This investment is dominated by fund managers, rather than investors buying directly, so there is an extent to which they represent a conduit for global capital rather than just U.S. money. Nonetheless, the increase over the last few quarters has been remarkable."
"Another feature is the range of locations that U.S. investors are seeking out with general pricing in Europe seen as attractive and 'recovery play' investments more accessible currently than in the U.S."
U.S.-based investors targeted a range of European locations, with assets acquired in at least 15 European countries in H1 2014. The city that attracted the biggest concentration of U.S. investment was Paris, at more than $2.5 billion (€1.9 billion).

The growth in "recovery play" investment was also evident in H1 2014. In Ireland, where the vast majority of transactions took place in Dublin, overseas buyers have been the main driver of growth in investment, with U.S. capital making the biggest contribution. Investors such as Blackstone, Hines, Kennedy Wilson and Lone Star all made significant acquisitions in Dublin in H1 2014, drawn in by the economic recovery story and prime yields that are attractive compared to many other European capitals. U.S. investors accounted for 43% of the investment volume in Dublin in H1 2014.
U.S. investors have also increased their activity in the Netherlands--a market in which they have not traditionally been active. These acquisitions were spread across the whole of the country, but did include some significant purchases in the main commercial city, Amsterdam.

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