Liquidity in real estate investment relates to the ease with which investors can enter and exit a market, with liquid markets characterised by a high transactional turnover of assets. Research undertaken by DTZ, with liquidity ratios allowing for a like-for-like comparison of markets, shows that the United Kingdom was Europe’s most liquid commercial property market last year, with an 11 percent ratio of deals undertaken and retaining its premier position. Sweden was second and Finland third.
Over a 10-year period, the top liquidity position goes to Sweden. The other countries in the top five over the past 10 years are, in descending order, the United Kingdom, Luxembourg, Germany and Poland.
The past few years have seen a significant increase in liquidity across Europe, DTZ says. Europe’s overall liquidity ratio reached a record low of 2.1 percent in 2009, but activity has picked up considerably since and the ratio increased to 5.6 percent last year, ahead of the 10-year average of 4.6 percent.
Nigel Almond, head of capital markets research at DTZ, comments: “The United Kingdom remained Europe’s most liquid market in 2014, when 11.3 percent of its stock was transacted. Sweden moved up to second last year, from third in 2013, when trading represented 9.4 percent of its stock, with another Nordic market, Finland, third at 7.7 percent and Germany fourth at 7.2 percent.
“France is interesting as it had the third-largest trading volume in absolute terms in 2014, but this represented just 4 percent of its stock being traded, so it only ranked 11th across Europe,” Almond explains. “This shows how focusing on volumes alone can be deceptive to investors, for whom liquidity is often the key.”
Peripheral markets like Ireland and Spain rose up the liquidity ranks as their recovery took hold. Magali Marton, head of EMEA research at DTZ, adds: “Over the past year, we have seen a number of markets move up the rankings. Finland was the most eye-catching as it rose from 10th spot in 2013 to third in 2014, driven by a rapid increase in sales of industrial and warehouse space. The peripheral markets also rose up the tables, with Ireland up from 14th to seventh and Spain from 19th to 14th as volumes in both these markets rose. In contrast, Italy dropped back from 17th to 19th spot because liquidity remained flat.”