Return to search

RCA: Europe hits pause button

Investment volumes in Europe ‘slow’ to €35.2 billion in the first quarter of the year according to Real Capital Analytics, claiming a pause has taken as investors struggle to locate suitable investment grade property.

European real estate investments actually slowed in the first quarter of the year compared to same stage last year, according to the latest research by data provider Real Capital Analytics (RCA)

RCA said in its European Capital Trends report that investors had “struggled” to deploy capital in their preferred markets – namely Europe’s biggest economies, which helped explain why there was €35.2 billion of investment in the region in the first three months of the year. That figure is a 10 percent drop on the same period of 2013, said RCA, which largely blamed Germany for the decline. It said Europe’s second biggest market saw a 31 percent drop in transactions on 2013.

Simon Mallinson, RCA’s managing director for EMEA, said: “A pause was inevitable as difficulties in finding suitable investment-grade product has become a familiar refrain from investors who are frustrated by the intense competition for a shrinking pool of assets. This situation has forced many to rethink their investment strategy, helping revive peripheral European markets, where pricing of prime assets is still attractive, and stimulate demand for secondary assets or locations in core markets.”

Germany might have caved in by one-third, but Spain has seen a 183 percent increase in volume to €1.4 billion. The Netherlands saw a “revival” with a 90 percent leap to €1.3 billion.

However, the largest transaction in the first quarter was Kuwait Investment Authority’s €2.05 billion investment in the More London Office portfolio in London. Lone Star’s €1.3 billion purchase of Coeur Defense in Paris was the largest single asset deal.

The top three most active buyers according to RCA were Lone Star, Cerberus Capital Management and Patrizia Immobilien of Germany.

Further commenting in the market, Mallison said “first movers” were taking profits sooner than probably even they expected. This highlighted how far the market had moved as low interest rates and signs that the worst is probably over for European economies.

He added: “We expect to see steady growth in transaction activity this year as Europe’s markets return to normality.