Apr 19, 2012 10:00 CEST
Commercial property investment in Europe reaches €23.8 billion in Q1 2012Apr 19, 2012 10:00 CEST
- Nordics see significant growth but investment in CEE property slows -
Investment turnover in the European commercial real estate market slowed at the start of 2012, largely reflecting a seasonal slowdown in activity, according to the latest research by global property adviser CBRE Group, Inc (CBRE).
The commercial property investment market totalled just under €24 billion in the first quarter of 2012 (Q1 2012), which represents a 31% fall in activity compared with the last quarter of 2011 and an 18% fall versus Q1 2011, bringing turnover broadly in line with activity during Q1 2010.
The Nordic region was a notable exception to the general slowdown in property investment activity across Europe, with an increase of nearly 50% in activity during Q1 2012 compared with Q1 2011. The region remains a favourite among risk-averse property investors and it is interesting to note that activity was evenly spread throughout the region with a year-on-year increase in the smaller Nordic markets of Norway, Denmark and Finland. Norway experienced exceptionally high activity during Q1 2012 at €2.2billion - surpassing Sweden, traditionally the most liquid market, as the most active market.
Jonathan Hull, Head of EMEA Capital Markets, CBRE, commented:
“The Nordic markets are increasingly active – government finances are favourable compared with the rest of Europe, as are the prospects for economic growth. Solid fundamentals have driven an increase in the number of foreign buyers looking to enter the region. Sweden remains a key target for many investors and we are witnessing increasing interest in other Nordic markets.”
In Q1 2012, there was a low level of property investment activity in Central and Eastern Europe (CEE) following bumper investment in the region throughout 2011. Property investment activity in the region totalled €901 million during Q1 2012; however, investor appetite remains strong for good quality property assets, particularly in core markets such as Poland where the majority of CEE property investment activity took place this quarter.
The CEE market is heavily driven by a small number of large deals which can cause large fluctuations in the quarterly investment totals. The lack of debt finance for all but the best quality stock, which is often larger in lot-size, is exacerbating this at present. Combined with general risk aversion among property investors, this is resulting in a growing mismatch between requirements and available product.
Jos Tromp, Head of CEE Research & Consulting, CBRE, commented:
“On the back of a search for security and limited property financing, the scope of active property investors in CEE is increasingly shifting towards the high-end of the market where large “trophy-like” assets are sought after. As witnessed during 2011, this causes large fluctuations in deal flow in the region and therefore Q1 2012 appears to be on the low-end of the spectrum. However, based on a strong pipeline of pending transactions, especially in Poland and the Czech Republic, we expect deal flow to increase from Q1 levels, which could cause a significant uptick in activity later this year.”
While experiencing a moderate slowdown (-9%) compared with Q1 2011, France showed a significant slowdown in property investment activity during Q1 2012 compared with Q4 2011 (-74%). It should be noted that this market has been particularly seasonal for the past few years, with similar fallbacks from Q4 to Q1 in each of the last three years.