With signs of economic improvement and attractive returns, investors are flocking to European real estate. Southern Europe has seen a dramatic uptick in commercial real estate investments so far this year, particularly in Italy and Portugal, according to Real Capital Analytics.
“Southern European investment is definitely on the rise this year as the economy continues to grow stronger,” Tom Leahy, director of EMEA analytics at Real Capital Analytics, said in a statement. “We are back to pre-crisis 2007 levels in transaction volume terms.”
The low interest rate environment is a sign of improving economic growth prospects. And low inflation appears to have persuaded investors that the rewards outweigh the risks.
In Q1 2015, European commercial real estate investment registered its most active first quarter since 2007. Europe had transaction volumes of €63.8 billion, a 57 percent rise in the first quarter compared to the first quarter of 2014. Capital from outside the region rose as well, with the 116 new investors who were making their first acquisitions in Europe accounting for 30 percent of property purchases. And investment volumes will continue to strengthen in 2015.
Portugal saw €206 million transacted in the retail sector, one of the strongest Q1 performances on record, according to Cushman & Wakefield’s European Marketbeat Snapshot. Office transaction volumes in Portugal were €43.4 million in Q1 2015, compared to €7.2 million in the first quarter of last year. In May, JLL announced a €20 million mixed-use development project in Lisbon. Morningbridge Lda is developing the 500-year-old Palácio dos Condes de Lumiares into 53 five-star luxury serviced apartments on behalf of Quick & Positive – Investimentos Imobiliários Lda.
“The Lumiares is one of the best investment opportunities in Lisbon for buyers attracted by the Golden Residence Permit for investment activity as well as for the markets where investors are motivated by the advantages of the Non-Habitual Resident Tax Regime in Portugal,” said Patrícia Barão, head of residential at JLL, in a statement.
There was a large amount of capital being directed toward the Italian market, according to Cushman & Wakefield’s European Marketbeat Snapshot. Italy registered a five-fold leap in transactions in Q1 2015 to €3.75 billion, according to RCA, the strongest Q1 since 2007.
Tristan Capital Partners purchased four Italian shopping centres from Altarea for €122 million through its European Property Investors Special Opportunities 3 fund in May. “Italy is firmly back on the radar screens of pan-European investors and Tristan has been looking to make our first major move in the market for some time,” said Cameron Spry, head of investments for Tristan, in a statement. “So when the chance arose in an offmarket deal to acquire these good quality shopping centres at attractive yields and with solid cashflows, we seized the opportunity.”
Q1 2015 was good for Spain as well, with transaction volume more than doubling. AXA Real Estate purchased 381 Santander banking assets across Spain from URO Property Holdings, totalling €308 million and representing 90,000 square metres of space. This was not AXA’s first investment in Spain, having purchased a Madrid retail asset in 2014 and a Barcelona office portfolio in 2013. Kennedy Wilson Europe Real Estate also made a significant investment in Spain earlier this year, with the €30 million purchase from court receivers of the landmark location Plaza Puerta del Sol 9 in Madrid.