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DTZ: Europe RE investment to beat 2007 peak

Increasing real estate investment in Europe could see the total volume this year surpass the previous peak of €230 billion in 2007, according to a DTZ report.

There is €125 billion of new capital targeting European commercial real estate, putting the region on track to beat its previous peak investment volume of €230 billion, said Magali Marton, head of EMEA research at DTZ.

A report from property services firm DTZ revealed that European commercial real estate investment totalled €51.4 billion in the first quarter of 2015, a 40 percent increase on a year ago. Furthermore, following a strong final quarter in 2014, in which €71 billion was invested, the latest figures show volumes over the last 12 months climbed to €208 billion, the first time since 2007 that the €200 billion mark has been exceeded in a 12 month period.

“We remain confident of the outlook for Europe’s markets during the rest of 2015. Commercial real estate remains attractive despite on-going yield compression and there is €125 billion of new capital targeting the region. This will lead to market activity increasing with the likelihood that investment this year could surpass its previous peak of €230 billion in 2007,” said Marton.

The UK and France saw 36 percent and 34 percent volume growth compared with a year ago, while Germany’s €9 billion of transactions was stable. Spain and Italy continued to welcome massive capital flows, resulting in triple digit growth, while Benelux and the Nordics posted 93 percent and 48 percent increases in volume. As a result the core three markets of the UK, France and Germany now represent 65 percent of activity, down from 74 percent a year ago and in line with long-term trends.

Domestic and overseas investors played an equal part in the European volume in Q1 2015. Domestic investors kept a 50 percent market share on buy side while European and non-European investors, both representing 25 percent of volumes, made close to €13 billion of investment each.

“We continue to see strong inflows from North American capital, mostly US, benefitting from a weaker Euro, while Asian and Middle Eastern capital also remain strong,” Nigel Almond, head of capital markets research at DTZ, commented.