MIPIM 2018: Europe CRE investment lifts

By Paul Norman - Monday, March 12, 2018 8:07

European commercial property investment hit €231.8bn in 2017 after €80.7bn was transacted in Q4, resulting in an 8.4% increase on last year, reports Knight Frank.

KF said the continued flow of capital from Greater China into the Central London office market helped the UK regain its position as Europe’s most active market from Germany, which had edged ahead in the first half of the year.

Following a slow start to the year, investment in the UK accelerated in the last half of the year, bringing annual volumes to €59.3bn. German investment volume of €50.9bn was a ten-year high, and the country was the leading destination for US capital entering Europe in 2017.

The France investment market had an extremely slow start to the year, but it recovered in Q4, when more capital was invested than in the three previous quarters combined, KF reported. This was partly due to a revival in investor confidence following political uncertainty earlier in the year. The market was dominated by local investors who accounted for more than 70% of transaction volumes.

Chris Bell, Managing Director, Europe, Knight Frank, said: “The European real estate markets once again showed their durability and robustness with an 8.4 per cent increase in investment in 2017. Along with the strength of the UK, Germany and France, the stand-out markets in 2017 were the Netherlands and Finland, both of which had record years, on the back of large inflows of cross-border investment. While North American and European investors were the main sources of capital in these two markets, there was also increased investment from Asian investors, who are showing growing interest in a broadening range of European markets.

“The logistics and industrial sector had an outstanding 2017, with investment volumes rising 42 per cent year-on-year to a record €38.9bn, or 17 per cent of the total commercial market. Volumes in this sector were boosted by CIC’s purchase of Logicor for over €12bn and GLP’s acquisition of Gazeley for €2.4bn. As well as demonstrating the strength of demand for logistics property, these deals are also indicative of the appetite for platform and portfolio deals from investors seeking to deploy large volumes of capital into real estate.”

Despite already being at record low levels across much of Europe, further yield compression was recorded in Q4 in markets including Amsterdam, Dublin, Frankfurt and Milan. As a result, the Knight Frank European Weighted Average Prime Office Yield hardened by seven basis points to a new low of 4.20%.

KF said Q4 was a "stellar quarter for a number of European office occupier markets, with take-up in Dublin, Madrid, Munich and Prague increasing by well over 50 per cent year-on-year". For 2017 as a whole, aggregate take-up in the major European markets monitored by Knight Frank was up by 9 per cent compared with 2016.

On the back of strong demand and tightening availability, European rental growth gathered momentum in Q4. Markets such as Amsterdam, Berlin, Brussels, Frankfurt, Madrid and Paris all recorded increases in prime office rents, pushing the Knight Frank European Prime Office Rental Index up by 1.5 per cent during the quarter.



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