European commercial real estate (CRE) investment activity was greater in 2015 than in any other year, according to Cushman & Wakefield’s latest investment market report.
European investment activity totalled EUR70 billion in Q4 2015, a 24 per cent increase on Q3 2015, which helped push the full year total to EUR246 billion, the highest level on record, and surpassing the previous peak of EUR230 billion in 2007.
Magali Marton, joint report author and a director of Research at Cushman & Wakefield, says: “Investment activity continues to grow across all markets. While the UK, continues to attract the biggest share of activity, the strongest growth in volumes has been located elsewhere as investors diversify their targeted locations.
“Of the major markets, Germany posted volumes of EUR53 billion in 2015, a 41 per cent increase on 2014 levels. The peripheral markets of Italy (+ 67 per cent to EUR8 billion) and Spain (+ 36 per cent to EUR11 billion) also registered strong year on year growth. In contrast volume growth was particularly low in the CEE with a mere 6 per cent rise to EUR6.8 billion in 2015. However the region, and Poland in particular, experienced a strong final quarter with more product coming to the market, satisfying investor appetite.”
Growth in investment was evident from all sources, although the strongest growth remained from cross border sources. European cross border investment was up 42 per cent over the year to EUR45 billion with non-European investors adding a further EUR76 billion (+32 per cent year on year). With fewer sales non-Europeans remained the only net positive investors in 2015.
Nigel Almond, a Director of Research at Cushman & Wakefield, adds: “Whilst the volume of non-European investment continues to grow across all markets, the balance of power is now shifting away from the UK and London. The UK’s share of non-European investment slipped from 53 per cent in 2013 to 44 per cent in 2015, with Germany the main beneficiary with its share rising from 15 per cent to 20 per cent. With many non-European investors having established their presence in the UK, they are now pushing out with more vigour into the continent. Peripheral markets (Ireland, Spain and Italy) attracted a further 10 per cent.”
Unlisted funds continue to dominate representing just under half of activity on the buy side as funds focus on deploying their raised capital. Strong investment in Q4 saw funds grow their holdings across Europe with net investment of EUR12 billion in 2015. Both listed companies and institutions – insurance companies in particular - were net buyers over the year, despite being slight net sellers in Q4. Private companies and other investors sit at the other end of the spectrum and remained the biggest net sellers.
Marton adds: “Looking forward we remain positive in our outlook for the market. The strong weight of capital remains and the lower for longer interest rate environment and QE (quantitative easing) on the continent will maintain the attractiveness of CRE across the region with volumes set to rise by a further 5-10 per cent to surpass EUR260 billion in 2016.”