European property investment climbs to €90bn

CB Richard Ellis released those figures at the Expo Real trade fair in Munich, which is drawing thousands of real estate investors keen on Germany and Central and Eastern Europe.

Investment in European property grew to €90 billion ($110 billion) in the first half of the year, a 42 percent increase from the same period in 2005.

The figure was released by global property services firm Richard Ellis at the Expo Real 2006 trade fair in Munich, Germany, where thousands have descended to showcase their company, hunt for deals and strike up new relationships.

The show is considered to be a more business-like version of MIPIM, the giant annual property jamboree in Cannes, France.

Nearly half of the transactions recorded were cross-border investment deals, according to Richard Ellis. Deal sizes have also increased: 58 percent of deals were over €100 million, compared to 51 percent in the first half of 2005.

The firm said that offices continue to be the dominant property sector, but Michael Haddock, EMEA research director, added: “One of the key trends has been the expanded appetite for investment outside of the usual sectors—office, retail and industrial—to include mixed-use properties and hotels.”

Hotels accounted for €4 billion worth of transactions in the period.

At the trade conference, Eastern and Central European companies were present in large numbers, exhibiting their projects. This year, for example, Slovakia was represented at a time when investors are looking for new markets. Poland, the largest market in the region, was also represented by a number of organizations.

One of the key trends has been the expanded appetite for investment outside of the usual sectors—office, retail and industrial—to include mixed-use properties and hotels.

Michael Haddock, research director, EMEA

Growing demand for property across the CEE has led to falling yields for 13 consecutive quarters, according to Richard Ellis. They now stand at 5 percent, bringing them more in line with established western European markets. Significantly, yields across the whole of Europe fell less quickly in the third quarter, suggesting that market activity may be decelerating.

However, delegates at EXPO Real remain bullish. Investors, developers, and brokers all continue to report high levels of activity, especially in Germany itself where investors feel there are still bargains to find. Three years ago, Germany accounted for a relatively small share of the European real estate investment market; today, it is the second largest market behind the UK. One of the other key features helping to drive the market is that German open-ended funds have become net sellers.

“Growth is coming from foreign money flowing into Germany,” said Haddock.

US investors are still the biggest buyers and sellers of property across Europe, followed by the British.