European Real Estate Investment Market Better Than Expected

23 Jan, 2012, Frankfurt

• € 126.2bn total market value
• Investment interests focussed on the United Kingdom, Germany and France
• Volume growth of 75% in the CEE markets
• With turnover at +24,5%, growth is strongest in the industrial segment
• Investment volume forecast for 2012: between 123 and 128bn EUR
• Funding shortfalls remain the current issue

The European real estate markets ended the year just gone stronger than had been expected. In the fourth quarter, investment volumes increased by 17.7% to €36.8bn, so that a result of €126.2bn can be recorded for the whole year. As has now been published by the international real estate service firm Cushman & Wakefield (C&W), foreign investors were the main drivers of investment business. Foreign investors increased their investment volumes by 16.2%, whilst growth of 3.6% was recorded from domestic investors. The market share of foreign investors stood at 35.8% in 2011 (2010: 33.2 %).

Investment interest has continued to focus on the three core markets of the United Kingdom, Germany and France, with these three accounting for 61.4% of all European real estate investments.
However, the largest growth rates recorded were in the countries with emerging economies: Seven of the ten strongest growth markets of 2011 were located in Central and Eastern Europe: Bulgaria, Estonia, Slovakia, the Czech Republic, Hungary, Russia and Croatia. Only three Western European countries (Switzerland, Denmark and France) are included in the top ten list of highest investment growth rates. Amongst the losers were the so-called PIIGS countries. Whilst investment volumes in Portugal, Ireland, Italy, Greece and Spain sank by a total of 25.9%, a growth in volume of 17.7% was registered in the other countries of the eurozone.

Industrial sector achieving most success

"If you take a look at the development of investment volumes according to different segments, growth in turnover has been achieved in all sectors," explains Inga Schwarz, head of research at C&W in Germany, "but it was the industrial sector which charted the strongest growth. Here, we're seeing an increase of 24.5% and a market share of 9.4%. Then next we have office real estate (volume growth: 11%; market share: 44%) and retail property (volume growth: 3 %; market share: 32%)." Nevertheless, the real estate consultants cite good demand in the retail segment. It is merely a dearth of suitable investment products coupled with difficult financing conditions for large transactions that is getting in the way of further turnover growth in the retail sector. As in the previous year, demand significantly exceeded supply. "The United Kingdom has regained the title of market leader, which Germany managed to hold temporarily during the course of 2011. Looking at the year as a whole, the United Kingdom is ahead of Germany in the retail segment."

Investment volumes 2012: Between 123 and 128bn EUR

At the start of 2012, the nervousness of market participants is evident on the European markets. Michael Rhydderch, head of the European Capital Markets Group at Cushman & Wakefield, explains: "The uncertainty that is felt on the market can have a considerably negative impact on the development of investment activity. And yet at the same time, volatility in other investment categories is disproportionately higher, and real estate returns currently lie at an attractive level. This situation will contribute to further growth in demand for high quality properties in the European core markets in 2012, in particular. Let's not forget, we have recently noticed new capital pouring into the European real estate markets and there are a few players from the sidelines getting involved in the centre of activity. Given these factors, we are expecting investment volumes to be the same over the coming twelve months as they were for the previous year. We consider an annual turnover of between 123 and 128bn EUR to be realistic."

Funding shortfalls remain the current issue

"Currently, the big problem in the market is financing - and that's set to continue being the case for a while," adds Schwarz. "Restrictions on the granting of credit aren't being lifted, and funding shortfalls remain the current issue. Refinancing will, however, have an effect on market activity. Some follow-up financing will not materialise, which will inevitably lead to an increase in the supply of investment products. Wholly new opportunities will open up here. In terms of demand, large pension funds and sovereign wealth funds from North America and the Far East, in particular, are available. High grade real estate in the European core markets will be the subject of their attention. Investors with their own private capital will similarly be present - as will wealthy private investors from Europe, Asia and the Middle East. One thing's for certain: Regardless of how the risk profile of an individual investor looks, he's going to have to conduct some pretty detailed research on his target market and segment to achieve his investment objectives."

back to real estate News & Events

Printer Friendly Version

Contact Us

For further information, please contact:

Susanne Weber
+49 69 50 60 73 - 365

More contacts