Direct investment into commercial real estate in Europe, Middle East and Africa rose three percent to €123bn (US$159bn) in 2012, boosted by the strongest quarter since 2007 (€46bn in Q4 2012 vs. in Q4 2007 €53bn), according to new research from Jones Lang LaSalle.
Richard Bloxam, Head of European Capital Markets at Jones Lang LaSalle said: “The strong end to the year illustrates that investors remain attracted to real estate opportunities, especially in the UK, Germany, France and Sweden. Interestingly, there was also a marginal increase in activity in markets such as Ireland and Spain during Q4 2012 which signals increased momentum for 2013. While much has been made about the increasingly globalisation of capital flows, the strength of the domestic market should not be overlooked. German, French and UK investors were the largest gross investors in Europe over the last year. ”
Richard Bloxam added: “The office sector had a stellar year in 2012, with activity increasing 24% year-on-year; almost 60% of office activity in 2012 was within London, Paris and the German Big 5 cities. This has helped consolidate London and Paris as two of the top 10 traded cities globally, with London holding onto top spot in 2012. Despite on-going demand for good quality shopping centres as evidenced by several large deals in Q4, retail investment volumes over the full year 2012 were down year on year due to a limited supply of appropriate product.”
Matthew Richards, Head of International Capital Group Europe said: “In 2012 we recorded a 36% increase in net investment into Europe by investors based outside of the region compared to 2011. The largest growth originated from Asia, where purchases into Europe grew by a staggering 80% year on year.
“We expect Asian offshore buyers to be many of the dominant sources of new capital this year and beyond as domestic regulations now allow investment outside of their domestic real estate market.”
He added: “We are forecasting global volumes could reach US$500bn in 2013 from US$443 in 2012, due to increased levels of demand for real estate coupled with a strategic reallocation towards this asset class by institutional investors. The Europe, Middle East and Africa region is expected to maintain similar volumes in 2013 to those achieved in 2012.”
Europe’s Highlights:
· Europe saw eight cross-border deals over €500m in Q4 2012;
· Paris had three deals greater than €500 million;
· ITFP* sold the Statoil Regional HQ in Oslo for circa €430 million to a syndicate of investors arranged by Arctic Securities, a Norwegian investment bank. The main investor was Madison, a US investor, who provided 35% of the equity;
· European retail investment volumes (excl. high street) were €19.4bn below 2011 levels of €31.3bn due to a lack of product on the market;
· Major international investors are accessing product by partnering their equity with expertise, exemplified by NBIM’s acquisition of a 50% stake in Meadowhall and CPPIB*’s joint venture with CityCon, a leading retail specialist in the Nordics;
· The purchase of Credit Suisse*’s Uetlihof office complex in Zurich by NBIM for CHF 1 billion (€828 million, USD 1.07 billion) was the largest ever real estate deal relating to a single property in Switzerland.
*Deals transacted by JLL