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EMEA Direct Commercial Real Estate Investment up 26% Year-on-Year in Q3 2011 to €28.8 billion
London, 19th October 2011 - Jones Lang LaSalle reports that European commercial real estate investment held up despite the turmoil in financial markets over the summer. There continues to be equity targeting the sector and we are witnessing more supply hitting the markets. However, the increased uncertainty due to the eurozone debt crisis and a more restrictive debt environment has led to a reduced appetite to take on risk in real estate investment. In addition there is a current shortage of supply of prime property to the investment market. Consequently we expect full year investment volumes to be up to 10% below our original €130 billion outlook for 2011.
European investment volumes over the third quarter of 2011 rebounded following a slow Q2 2011. In total €28.8 billion was traded, reflecting an increase of 13% quarter-on-quarter and growth of 26% year-on-year. As a result, year to date volumes are 21% ahead of the equivalent period last year.
Following a weak Q2 2011, the UK market caught up in Q3, with investment increasing 16% quarter-on-quarter, but was relatively stable year-on-year, down 3%, compared with 25% growth for the EMEA region. Robert Stassen, Head of Capital Markets Research at Jones Lang LaSalle commented: “While the UK has continued to be the largest market in Europe, accounting for almost 30% of activity, its growth has been lagging Germany and France in the last two quarters. Although, Germany and France started from a lower base in 2010, this also reflects the unwillingness of investors to move to more risky investments as well as the current lack of supply of prime assets”.
Strong year-on-year performances were recorded in Germany (+79%), France (+26%), Scandinavia (+60%), and Central and Eastern Europe (CEE) (181%). Richard Bloxam, Head of European Capital Markets at Jones Lang LaSalle noted: “The perceived stability in Germany and France means these markets are benefitting from the current turmoil in the financial markets, while investors attracted by the robust growth forecasts across the Nordics and CEE are driving activity here.”
Russia (+108%) has performed strongly this quarter. With €3.5 billion transacting over the year to date, it is currently ranked as the fifth largest market in Europe. Thomas Devonshire-Griffin, Head of Russian Capital Markets at Jones Lang LaSalle, commented: “Risk averse international core investors avoided Russia for the most part during the crisis, but are now returning following a strong recovery in the occupational market and good availability of debt”.
The countries at the forefront of the sovereign debt crisis continued to witness limited investment. There was an uptick in Italy, which recorded more than €1.2 billion traded in the quarter, reflecting an increase of 63% year-on-year. In Spain, investment volumes were low, but we have noticed increased investor interest over the quarter.
Offices were the largest sector accounting for 40% of activity. However, retail continued to attract investors, taking a 31% share, with prime product and core shopping centres trading well. In particular, the attractive consumer outlooks in Germany and Poland resulted in retail dominating activity, accounting for 52% and 35%, respectively. Jeremy Eddy, Head of European Retail Capital Markets, commented: “The retail sector in both Germany and the CEE is still one of the bright spots in the investment market, with strong demand for both core and core-plus product being maintained.”
Global direct real estate investment in the third quarter of 2011 totalled $99 billion, up 34% on the same period in 2010. In US dollars, EMEA was up +38% year-on-year, which compared with +3% for Asia Pacific and +60% for the Americas. First nine months total transaction volumes reached $297 billion.
Robert Stassen concluded: “Real estate fundamentals remain relatively strong and the asset class is attractive in comparison with equities and bonds. As a result, there is a growing volume of capital targeting real estate and this could help generate activity in the final quarter of the year and into 2012. That said the deepening of the eurozone debt crisis over the summer has increased uncertainty and led to a more restricted debt environment, which has reduced appetite to take on risk in real estate investment. In addition there is a current shortage of supply of prime property to the investment market. Consequently we expect full year investment volumes to be up to 10% below our original €130 billion outlook for 2011”.
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Notes to Editors:
• Entity-level transactions, land acquisitions, development projects and multi-family residential investment are excluded from our data as well as deals below $5 million.• Cross-border investment is where purchaser, vendor or both originate from outside the country in which the asset is located.• Cross-border investment is classified as ‘intra-regional’ investment (both purchaser and vendor originate from the region where the asset is located) and ‘inter-regional’ investment (purchase, vendor or both originate from outside the region in which the asset is located.• Global Funds are funds which raise capital in multiple regions.• EMEA stands for Europe, Middle East and Africa.
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