2021 a Record Year for European Real Estate Investment
Total investment volumes reach €359bn, up 25% on 2020 and 8% on 2019, the previous record year
Investment into European real estate reached an all-time high in 2021, according to the latest data from global real estate advisor, CBRE. The data shows that €359bn was invested into commercial real estate in 2021, up 25% on 2020 and up 8% on 2019, the previous record year. Q4 2021 was also a record quarter for European real estate investment, with volumes totaling €136bn, up 37% on Q4 2020 and 10% from Q4 2019.
Germany and the Nordics both posted record investment volumes with increases in 2021 of 39% and 44% respectively. Germany saw total investment volumes reach €110bn, the highest amount ever recorded by a European country. Most other major European markets saw higher full-year volumes compared to the previous year, including the UK (49%), Ireland (54%), Spain (33%) and Italy (13%). However, the rebound in volumes was not universal, with 2021 volumes down on 2020 in several markets including France (-9%), Portugal (-21%) and the Netherlands (-10%).
The record year was largely driven by several large platform deals including Vonovia’s €22.3bn take-over of Deutsche Wohnen’s Residential platform in Germany and the €9.1bn sale of Akelius’ Residential business in Germany and the Nordics to Heimstaden, where CBRE acted as financial and real estate advisor. This increase in M&A and portfolio activity was a main conduit through which investors allocated larger volumes of capital to real estate, particularly in the Multifamily sector. This trend is expected to continue into 2022.
According to CBRE, the Office market remains the largest sector in Europe, with investment volumes reaching €111bn in 2021, up 16% on 2020, signaling a return of investor confidence. The Office market was particularly strong in the Nordics (up 117%), the UK (up 48%), the Netherlands (up 30%), Spain (up 27%) and Germany (up 10%). In 2022, CBRE expects a broader geographical recovery of investment into the European Office sector.
The Multifamily market continued to perform exceptionally well, posting a record year, and is now challenging the Office market as the largest investment sector. Total investment volumes reached €102.6bn in 2021, just €9bn behind the Office sector. Investment volumes were up 42% on 2020, boosted by large amounts of M&A and portfolio activity.
Last year was also a record year for Industrial and Logistics investment, with volumes up 48% reaching €62bn. A very strong occupational market underpinned notable transactions, including GIC’s €3.1bn recapitalization of EQT Exeter’s Europe Value Venture Fund III, Blackstone’s £1.7bn acquisition of Asda’s distribution network and the €1bn sale of Montepino and CBRE Investment Management’s Spanish logistics portfolio to Bankinter.
Hotel investment volumes continued to point toward a recovery. Hotel volumes reached €17.1bn in 2021, up 70% on the previous year and there has been no visible distress in the market. Meanwhile, the Retail market is still under pressure with volumes falling 11% to €35.2bn in 2021. However, certain markets showed upticks in volumes, including the UK (51%), the Nordics (23%) and CEE (41%).
We saw a strong rebound in investment volumes in 2021, surpassing the previous record set in 2019, and we are anticipating the positive momentum to continue. The recovery has been supported by the low interest rate environment and strong economic growth. This has bolstered investor confidence, but rising inflation and the continued emergence of Covid-19 variants remain challenges. Following record performances in the Multifamily and Industrial sectors, we are anticipating further strong appetite from investors for these asset classes in 2022 and the Office recovery is now well underway. Investors are once again starting to see value in Retail and we expect more capital to target the sector in 2022, particularly Retail Parks and Grocery-anchored Retail.