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Cushman: European RE investment beats 2007 peak

Rolling annual volumes in the region hit its highest level on record during the third quarter.

European commercial real estate investment activity surpassed its 2007 peak in the third quarter, hitting its highest level on record, according to Cushman & Wakefield’s latest investment market report.

European investment activity in the third quarter totaled €51.5 billion, a 16 percent increase on the same period a year ago. As a result, rolling annual volumes climbed to €237.8 billion in the third quarter, surpassing the previous high of €234.6 billion during the third quarter of 2007.

“With a strong sales pipeline, portfolio and corporate activity, we see full year volumes growing towards the €250 billion mark this year, with activity set to be sustained into 2016,” commented Magali Marton, co-author of the report and research director at Cushman & Wakefield.

Investment activity grew across all markets, and while the UK, Germany and France continued to attract the biggest share of activity, the strongest growth in volumes has been outside these markets.

“Cross-border investment remains robust, with investment levels showing greater growth than domestic players. Close to €75 billion (31 percent) of capital invested on a trailing 12-month basis came from outside of Europe. Over the same period, domestic and European cross-border investors continued to divest and non-Europeans remained net buyers in European commercial real estate,” added Marton.

And, in spite of the recent negative headlines, Chinese investment into Europe has been strong. On a trailing annual basis, Chinese capital invested close to €4 billion in Europe, a 37 percent increase on the same period a year ago, with €1.7 billion invested in the third quarter alone.

More capital is also moving away from the UK and Central London. In the third quarter, just 36 percent of non-European investment was invested in UK commercial real estate. This compares to an average of over 50 percent in the previous four quarters. Germany, at 19 percent, was the second most active market, followed by the Nordics at 13 percent.

“Whereas a year ago over 90 percent of capital was invested in the UK, this fell to 59 percent this quarter and underscores a growing trend of increased investment in other European markets as Chinese and other overseas investors diversify their holdings,” said Nigel Almond, co-author of the report and research director at Cushman & Wakefield.