North American investors accounted for 30 percent of all cross-border commercial property purchases in Europe in 2011, up from 21 percent in 2010, according to research by Los Angeles-based commercial real estate services firm CBRE Group. The US capital flow into Europe exceeded €9 billion last year, while Canada contributed an additional €2 billion, together representing the largest share of cross-border activity in 2011.
Non-European buyers – which also included Asian and Middle Eastern sovereign wealth funds and pension plans – helped to boost commercial real estate investments in the region by 7 percent to €118 billion in 2011, the report said. Such investors represented more than 17 percent of total European investment in 2011, an increase from 13 percent in 2010.
While North American investments spanned a number of European markets, the largest share of capital went into the United Kingdom, particularly the Central London office market, which represented about 18 percent of US and Canadian investment into Europe last year.
Canadian investment into Europe was driven in particular by limited opportunities at home. “Canadian investors typically are long-term holders and already hold most of the key assets domestically,” said Jonathan Hull, CBRE’s EMEA head of capital markets, in the report. “This limited domestic universe is leading to the need to diversify and seek opportunities abroad.” Recent legislative changes to pensions also have contributed to Canadian investors becoming more active real estate buyers globally.
Meanwhile, US investors, including institutional buyers and pension funds, also have remained prominent players in the European real estate markets, with some of the largest asset managers in the industry, such as The Blackstone Group and The Carlyle Group, continuing to target distressed assets that offer higher risk/return profiles. Aside from direct real estate purchases – including Morgan Stanley Real Estate Investing’s acquisition of the Galleria Shopping Centre in St. Petersburg during the fourth quarter for about €840 million, US investors also were the main buyers of European real estate loan portfolios in 2011.
Although non-European capital accounted for a growing share of cross-border real estate purchases, European investors collectively still made up the majority of such investment activity across the region. German buyers were the most active on this front, although their share of investment activity fell from 24 percent of the cross-border market in 2009 and 2010 to 12 percent last year. This decline reflected German open-ended real estate funds becoming more active buyers domestically, as well as a general dip in institutional activity from the previous year.