Photo: The Academy of Urbanism
Commercial property investment in Europe soared 25 per cent in 2015.
Knight Frank’s latest report shows that growth moderated in the final months of 2015 to €64.5 billion, just 0.5 per cent up on the same period in 2014. Despite that lack of momentum, though, last year’s total investment still reached €238.5 billion, up a quarter on 2014.
Increases in investment activity were widespread in 2015, with the core markets of the UK, Germany and France all seeing transactions rise by more than 20 per cent. Among peripheral markets, investment volumes grew particularly strongly in Italy and Portugal, both fuelled by surging demand from international investors.
The strength of investor demand kept European prime yields under downward pressure throughout 2015, although the pace of yield compression slowed in Q4. The Knight Frank European Weighted Average Prime Office Yield came down by 4 basis points in Q4, to an all-time low of 4.79 per cent, largely on the back of yield compression in Amsterdam, Berlin, Brussels, Copenhagen and Lisbon.
“With large amounts of capital continuing to target European property, strong
investment activity is expected to continue in 2016,” reads the report.
Indeed, many of the factors that supported the investment market in 2015 – including the stabilising Eurozone economy, low interest rates and wide yield
spreads to other asset types – look set to remain favourable to property investors throughout 2016.
Supported by the stabilisation of the Eurozone economy, European occupier market activity improved healthily last year. On an annual basis, aggregate take-up in the major markets monitored by Knight Frank rose by 10 per cent. This was despite falling take-up in Europe’s two largest markets, London and Paris, and was driven by the strong performance of German, Iberian and CEE markets.
Eurozone GDP growth is now forecast to improve modestly to around 1.7 per cent, following an increase of 1.5 per cent in 2015. As a result, rental growth may spread to a wider range of cities in 2016 than Dublin, Frankfurt, London, Madrid and Stockholm. Paris, for example, is expected to see prime office rents increase following more than two years of stability.
However, the exceptional growth in transaction volumes seen in 2015 is “unlikely” to be repeated this year.
Commercial investment in Europe tops 2007 levels
3rd September 2015
Investment in European commercial property has surpassed 2007 levels this year.
New figures from Savills show that the first half of 2015 has witnessed the highest levels of commercial property investment activity in eigh years, with investment in 16 participating countries totalling almost €102.5bn – 25 per cent up on the same period last year.
“In line with our Q1 forecasts, the European investment market is on track to top €230bn by the end of this year as commercial property investors continue to favour core markets, with the UK, Germany and France still accounting for 67.8% of the total volume,” says Lydia Brissy, director at Savills’ European research team.
“However, the share of the markets outside of the top three countries is increasing, due to stronger investor interest for non-core countries, which offer attractive pricing and supply of large assets and portfolios. Overall, investors are more open to move up the risk curve. They seek future yield compression by targeting secondary or alternative assets in core cities, or prime assets in secondary markets.”
The office sector continued to dominate the investment activity in most countries across Europe, capturing about 39 per cent of the transaction volume per country on average. The only exceptions where retail properties accounted for a higher share of property investment deals were Germany (42 per cent), Finland (43 per cent), Netherlands (43 per cent), Norway (62 per cent) and Portugal (83 per cent), which saw the sale of large-scale retail portfolios in the past quarter.