Full impact of Covid-19 felt across Europe in Q2 2020

Logistics and Multifamily outperform as investors seek sustainable income streams

Total real estate investment in Europe reached €43bn in Q2 2020, representing a decrease of 39% on the same period last year, according to the latest data from global real estate advisor, CBRE. This brings H1 2020 investment volumes in Europe to €129bn, a 2% increase from €127bn for the same period in 2019.

Whilst Q2 investment volumes fell significantly as the impacts of the Covid-19 pandemic were fully realised, investment volumes in Q1 2020 reached an all-time high due to a number of large transactions in Germany, the UK and The Nordics. This has ensured that H1 2020 investment volumes have remained in line with the previous year. In Continental Europe (excluding the UK and Ireland) investment volumes for H1 2020 were up 6% on the same period last year but down 34% on Q2 2019.

Whilst Q2 volumes were down across the region, Germany, Austria, the Netherlands, and CEE outperformed the 39% decline for Europe, recording more moderate declines of 20%, 17%, 23%, and 23% respectively.

On a month by month basis across Europe, May was most severely impacted by the various Government-imposed lockdown measures and witnessed a significant decline in transaction activity. June saw a slight uptick as travel restrictions and lockdown measures began to be relaxed. This upward trend in volumes is expected to continue as Europe’s economy continues to recover.

At a sector level, Logistics and Multifamily assets outperformed other sectors as investors sought stable income streams amid increased economic uncertainty. Consequently, Multifamily investment is closing the gap with Offices, which remained the largest asset class. Year-to-date investment volumes into Multifamily reached €33bn, up 37% on the same period last year and investment into Logistics reached €15bn in H1 2020, a 5% increase on the same period last year. Meanwhile

Offices have seen transaction volumes of €41bn since the start of the year, representing a decrease of 16% on H1 2019.

Retail continued to prove challenging, with volumes falling 25% in Q2 2020. However, investment volumes were up 16% for H1 2020 due to a strong performance in Q1 2020 as a result of a number of large portfolio transactions. The first half of 2019 also saw lower-than-usual retail volumes.

Despite many countries across Europe entering into lockdown in early to mid-March, the true impact of the pandemic was not reflected until Q2, with May recording the greatest decline in activity. However, the uptick in investment we saw in June as restrictions began to be eased points to the start of a recovery. There is an abundance of capital ready to be deployed as limitations continue to be relaxed and we have seen very little movement in pricing for prime assets, particularly in the major gateway cities
Chris Brett, Head of EMEA Capital Markets, CBRE