European real estate investment activity ticks up in Q3 2011

London, 12 October 2011 – The stability of commercial real estate capital values and continued investor interest in commercial property led to an increase in real estate investment activity in Europe in the third quarter (Q3) of 2011, in sharp contrast with the volatility in other asset classes over the same period, according to the latest data from CBRE.

The total value of commercial real estate investment in Europe in Q3 2011 was €26.3 billion, representing a slight (2%) increase on the €25.8 billion recorded in Q2 and a 7% increase on the €24.5 billion in Q3 2010.

The European property investment markets that showed the strongest growth, quarter-on-quarter, were Italy (+69%) and France (+42%). In the case of Italy, this sharp increase can be traced to a low level of investment activity in Q2 and one or two large deals completing in Q3 to swell the quarterly total. In France, there has been an increasing amount of property coming to market in Paris which has helped to increase transaction levels.

Looking at the longer-term trends, the Central and Eastern Europe (CEE) region stands out as the fastest growing European real estate investment market so far in 2011. The year-to-date property investment stood at €8.0 billion at the end of Q3, which compares to a total for the whole of 2010 of just €5.1 billion. Most CEE markets have reported increasing activity, but investment remains concentrated in the core CEE countries (Poland, Czech Republic and Hungary), as well as in a resurgent Russian market. In Western Europe, Belgium, Germany and Sweden are also showing strong year-on-year growth.

This increase in property investment activity comes at time when capital values have shown little growth. According to the CBRE indices, both prime rents and prime yields were largely unchanged over the quarter. The stability of the real estate sector is in sharp contrast with the volatility in other asset classes over the same period.

Jonathan Hull, Head of EMEA Capital Markets, CBRE, commented:

“The last quarter has reinforced some of the earlier trends seen in Europe over the last year or so, such as that prime real estate is holding up fairly well, even in the current uncertain climate. However, we are seeing weakness in secondary markets. On a more positive note, with €81 billion of investment activity reported in the market in the first three quarters of the year, we expect European investment turnover to exceed that in 2010, when €110 billion was transacted for the full year.”