Busy year for European commercial property expected
In 2014, Europe observed commercial real estate transactions valued at €213.1 billion, the sectors highest volume since before the financial crisis. The figure represented a 13 per cent increase in the value of transactions from the year before, according to a report by Real Capital Analytics released on the 04 February.
Due to huge interest in commercial property in Paris, France as a whole saw a 31 percent increase in investment. RCA showed that for each euro invested in French commercial property, 74 cents went to the Paris market.
“Political and economic uncertainty in France deterred investors in 2012 and 2013, leaving assets in Paris attractively priced relative to the other core investment markets of western Europe,” said Tom Leahy, RCA’s director of EMEA analytics.
The figures also showed that despite a three percent decline in the value of commercial transactions in London, there was a regional increase of 16 percent during 2014. The high cost of commercial property in London has led to a sustained increase in the amount of capital being invested in regional commercial property developments, as investors look to alternative markets for better value.
A similar scenario occurred throughout Germany where first choice property markets such as Berlin, Munich and Hamburg weakened as Cologne and Stuttgart strengthened.
The best performing markets were those of Ireland and Spain, where increases in volumes were dramatic, though given that these markets had been hit hardest by the fall in property prices after the financial crisis, it is by no means surprising. While Spanish commercial investment volumes in Spain improved by 89 percent, Ireland’s commercial property market saw volumes of investment increase by 134 percent.
Those investing were primarily made up of equity funds and global investors. The RCA noted that while global investors had their busiest year since 2007, domestic investors accounted for only 53 percent of all investment volumes, while investment volumes from Russia almost halved.
“Prospects for the market look good in 2015 following the European Central Bank’s January decision to pump hundreds of billions of stimulus money into the region’s economy,” said Simon Mallinson, RCA’s managing director for Europe, the Middle East and Africa.
“Quantitative easing will lower interest rates for an extended period of time to support real estate investment in the euro zone, while the weaker euro may attract more international investors to buy assets,” he added.