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21. Mai 2012 
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European real estate investment volumes decline in Q1 2012 as European banking and sovereign debt crisis continues
DTZ today released its latest European Investment Market Update. The report shows first quarter 2012 commercial real estate investment activity totalled €23.4bn, a 30% decrease on Q4 2011. This is in line with the performance recorded in Q1 2011. However, the uncertainty which currently dominates the European economic context and consequently, the commercial real estate market has negatively impacted investors’ sentiment.
Magali Marton, Head of DTZ CEMEA Research, said: “Among Europe’s three largest markets, the UK is the only country to have posted an increase this quarter in Euro terms. Here volumes rose with a modest 2% to €8.9bn in Q1 compared with €8.8bn in Q4 2011 (in local currency volumes fell a marginal 0.5%). In sharp contrast, France saw its volume drop to €2bn from a record €8bn at the end 2011. The German market has also been impacted by the slowdown with €5bn invested, down by 18% from Q4 and by 5% from the first quarter in 2011. These results are in line with our investors survey conducted as part of our Money into Property report. Economic troubles and the emergence of new regulations are expected to slow down the market activity in 2012.”
Elsewhere in Europe, the Nordic markets continued to register a buoyant activity level with €3.2bn invested compared to €3.8bn in Q4. However, Q1 results were 37% higher in 2012 than in 2011. The majority of activity continued to be in Norway (€1.8bn) and Sweden (€1.4bn) due to significant deals in the office and retail sectors. The decline of activity registered in Q4 2011 in CEE has continued with only €717m of investment in Poland and no investment activity reported in the Czech Republic or Hungary.
Domestic investment totalled €14.6bn this quarter, a 32% decrease on Q4 reflecting a market share of 62%, slightly below its average (63%) since 2008. Activity from cross-border investors was less marked in Q1 2012, especially from intra-regional investors – those located within Europe but operating outside their home market. In contrast, inter-regional investors were quite active this quarter with an investment volume of €5.4bn in Q1 2012 and a market share of 23%.
Analysis of cross-border activity by country shows differing trends in Q1 2012. The reduction in cross-border activity was significant in France, where domestic investors dominated their home market with a massive market share. As a result of better economic prospects and its “safe haven” status, Germany saw significant growth in overseas capital, comprising 36% of activity. Foreign investors’ market share has increased in both the Nordics and CEE countries in Q1.
Nigel Almond, Head of DTZ Investor Research added: “There have been no major changes regarding the most active type of investors in Q1 2012 compared to 2011. Private property vehicles and companies are still the dominant players across the European investment market, with acquisitions totalling €14.2bn this quarter, representing over 61% of activity. Listed property companies remained net sellers as they took advantage of the demand for better quality assets and sold down some of largest assets in their portfolio and sought to further reduce their overall gearing.”
Magali Marton commented: “The end of 2011 and the first quarter of 2012 has seen investors and lenders sentiment deteriorating significantly as uncertainty about the economic outlook and its negative impact on the commercial real estate market in Europe has continued to grow. As a consequence, we have downgraded our last forecast of the investment volume to €100bn in 2012 posting an 11% fall. Despite this decline, the European market remains attractive for most of the investors and private equity funds in Europe and outside. The size of the market, its diversity and the wide range of yields will continue to attract capital flows.”
Magali Marton, Head of DTZ CEMEA Research, said: “Among Europe’s three largest markets, the UK is the only country to have posted an increase this quarter in Euro terms. Here volumes rose with a modest 2% to €8.9bn in Q1 compared with €8.8bn in Q4 2011 (in local currency volumes fell a marginal 0.5%). In sharp contrast, France saw its volume drop to €2bn from a record €8bn at the end 2011. The German market has also been impacted by the slowdown with €5bn invested, down by 18% from Q4 and by 5% from the first quarter in 2011. These results are in line with our investors survey conducted as part of our Money into Property report. Economic troubles and the emergence of new regulations are expected to slow down the market activity in 2012.”
Elsewhere in Europe, the Nordic markets continued to register a buoyant activity level with €3.2bn invested compared to €3.8bn in Q4. However, Q1 results were 37% higher in 2012 than in 2011. The majority of activity continued to be in Norway (€1.8bn) and Sweden (€1.4bn) due to significant deals in the office and retail sectors. The decline of activity registered in Q4 2011 in CEE has continued with only €717m of investment in Poland and no investment activity reported in the Czech Republic or Hungary.
Domestic investment totalled €14.6bn this quarter, a 32% decrease on Q4 reflecting a market share of 62%, slightly below its average (63%) since 2008. Activity from cross-border investors was less marked in Q1 2012, especially from intra-regional investors – those located within Europe but operating outside their home market. In contrast, inter-regional investors were quite active this quarter with an investment volume of €5.4bn in Q1 2012 and a market share of 23%.
Analysis of cross-border activity by country shows differing trends in Q1 2012. The reduction in cross-border activity was significant in France, where domestic investors dominated their home market with a massive market share. As a result of better economic prospects and its “safe haven” status, Germany saw significant growth in overseas capital, comprising 36% of activity. Foreign investors’ market share has increased in both the Nordics and CEE countries in Q1.
Nigel Almond, Head of DTZ Investor Research added: “There have been no major changes regarding the most active type of investors in Q1 2012 compared to 2011. Private property vehicles and companies are still the dominant players across the European investment market, with acquisitions totalling €14.2bn this quarter, representing over 61% of activity. Listed property companies remained net sellers as they took advantage of the demand for better quality assets and sold down some of largest assets in their portfolio and sought to further reduce their overall gearing.”
Magali Marton commented: “The end of 2011 and the first quarter of 2012 has seen investors and lenders sentiment deteriorating significantly as uncertainty about the economic outlook and its negative impact on the commercial real estate market in Europe has continued to grow. As a consequence, we have downgraded our last forecast of the investment volume to €100bn in 2012 posting an 11% fall. Despite this decline, the European market remains attractive for most of the investors and private equity funds in Europe and outside. The size of the market, its diversity and the wide range of yields will continue to attract capital flows.”
| Significant deals & key figures | |||||||
| Address /Town/ City | Property type | Purchaser | Vendor | Price (€ million) | |||
| Galereya / St Petersburg | Retail | Morgan Stanley | Meridian Capital | 991 | |||
| Operakvartalet / Oslo | Office | DnB Liv | OSU | 633 | |||
| Złote Tarasy / Warsaw | Mixed-use | Unibail Rodamco | ING Real Estate Develoment | 475 | |||
| One Exchange Square / London | Office | Permodalan Nasional Bhd | KanAm | 465 | |||
| High Tech Campus / Eindhoven | Office | Chalet Groep | Philips | 450 | |||
