2022 sees strong start for European Real Estate Investment
- Total investment volumes reach €78bn in Q1, up 29% on Q1 2021 and second strongest Q1 behind record-breaking Q1 of 2020
- Southern Europe posts record Q1 investment volumes
- Record Q1 levels of investment recorded in Industrial sector
Investment into European real estate reached €78bn in Q1 2022 - the second strongest ever start to a year - according to preliminary data from global real estate advisor, CBRE.
Commercial real estate investment volumes were up 29% on the same period in 2021 and second only to the record-breaking start to 2020, when total investment reached €90bn.
Southern Europe experienced its strongest ever start to a year. Spain, Italy and Portugal were especially buoyant, with increases of 155%, 123% and 105%, respectively, compared to the same period last year. Italy and Spain also exceeded the robust levels of Q1 2020.
Most other major European markets saw higher Q1 volumes compared to the previous year, including Germany (51%) and BeNeLux (27%). However, the rebound in volumes was not universal, with Q1 2022 volumes down on 2021 levels in several markets including France (-41%), Ireland (-39%), and Poland (-26%).
A more mixed picture was evident in the Nordics, with record Q1 investment volumes in Norway (104%), but a downward trend in Denmark.
According to CBRE, the Industrial market posted its strongest Q1 ever in 2022, with investment volumes up by 39% on Q1 2021 and 52% on Q1 2020. The Industrial market was particularly strong in Norway (993%), Spain (402%), Germany (112%) and Italy (93%), compared with Q1 2021’s Covid-suppress levels. Investor interest in Industrial is underpinned by expectations of rental growth resulting from low vacancy rates and continued brisk occupier demand, much of it fueled by e-commerce activity, in most of Europe’s markets.
Office market investment was also stronger than the last two years, up 78% on Q1 2021 and 5% on Q1 2020. Office investment reached the highest Q1 ever in the Czech Republic, Slovakia, Italy and Poland. Investors are focused on prime sustainable assets and competition for these remains high. On the other hand, lower quality assets attract less interest at the moment as investors assess what capex needs are in bringing these assets up to sustainable standards.
There were continued signs of recovery in the Retail and Hotel sectors, up 63% and 3%, respectively, on Q1 2021. France and Norway saw the strongest ever Q1 investment in Retail, while Spain had a record-breaking start to the year in Hotels. As the impacts of Covid are receding, consumer spending and travel have increased again, buoying investor sentiment towards these sectors.
Residential and Healthcare are the only sectors that are down for this year’s Q1 compared to the last two years (-21% vs. Q1 2021 and -14% vs. Q1 2020). Interest in both of these sectors has remained strong and investment activity is largely slowed by the lack of product availability.
This quarter’s performance highlights again institutional capital’s ongoing focus on the European real estate market. However, an increasing cost of capital throughout markets will put further reliance on rental performance as a key factor in value changes we may see in the future.