- Full year volumes reached EUR 246bn in 2015, surpassing 2007 record.
- Strongest growth in Germany, Periphery and rest of Europe.
- Cross border investment driving volume growth as investors increasingly look beyond the UK.
- Strong weight of capital targeting commercial real estate with lower for longer interest rates will drive volumes 5-10% higher in 2016.
European commercial real estate (CRE) investment activity was greater in 2015 than in any year previous, according to Cushman & Wakefield’s latest investment market report.
European investment activity totalled EUR70bn in Q4 2015, a 24% increase on Q3 2015, which helped push the full year total to EUR246bn, the highest level on record, and surpassing the previous peak of EUR230bn in 2007.
Magali Marton, joint report author and a director of Research at Cushman & Wakefield, said: “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 EUR53bn in 2015, a 41% increase on 2014 levels. The peripheral markets of Italy (+ 67% to EUR8bn) and Spain (+ 36% to EUR11bn) also registered strong year on year growth. In contrast volume growth was particularly low in the CEE. However the region, and Poland in particular, experienced a strong final quarter with more product coming to the market, satisfying investor appetite.”
Soren Rodian Olsen, Partner and Head of Office & Industrial Investments at Cushman & Wakefield in Poland, said: “The record investment volumes in Europe also had a positive impact on the Polish market which saw a 25% year-on-year increase in 2015, taking to investments to approx. EUR4bn. The sentiment among international as well as local investors remain strong and we expect 2016 to be another growth year, most likely to be dominated by several portfolio transactions across all asset classes.”
Growth in investment in Europe was evident from all sources, although the strongest growth remained from cross border sources. European cross border investment was up 42% over the year to EUR45bn with non-European investors adding a further EUR76bn (+32% 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 added: “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% in 2013 to 44% in 2015, with Germany the main beneficiary with its share rising from 15% to 20%. 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%.”
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 EUR12bn 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.
Magali Marton added: “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% to surpass EUR260bn in 2016.”