German cities lead CBRE ranking of Europe’s property investment destinations

Germany boasts five cities in CBRE’s ranking of Europe’s ten largest commercial real estate investment destinations for the first time, according to the latest research from global property advisor CBRE.

While activity by non-European buyers has increased in H1 2013, commercial real estate investment remains concentrated in a small number of European cities. The mature markets of London and Paris continue to lead in terms of their share of the European market and are ranked first and second respectively, while Moscow is now in third position.

A high level of interest from both international and domestic real estate investors has led to increased activity in several German cities, with Dusseldorf (+210%), Frankfurt (+72%), Hamburg (+52%) and Berlin (+24%) all experiencing significant growth compared to the same period in 2012.

German investors have been highly focused on their home market in recent years and this focus intensified in H1 2013 with 76% of acquisitions by German investors in Europe being in their domestic markets (compared to 53% in 2007-2009). The number of foreign buyers targeting the German market has also increased, with international investors from 21 different countries making acquisitions in Germany so far in 2013. Frankfurt, in particular, has seen a substantial proportion of investment from outside of Europe (39% of the total).

London and Moscow stand out as having attracted the highest proportion of cross-regional investment, with over 60% of transactions in both cities completed by non-European buyers. This increase in investment from outside Europe is a major driver of the market as non-European buyers accounted for 28% of transactions in H1 2013 up from 22%% in H1 2012.

As one of the three largest cities in Europe by population (London and Paris are the largest respectively), Moscow’s rise as a real estate investment destination is long overdue; with a 63% increase in activity in H1 2012 driving the city to third position on the rankings. Population on its own is clearly not a driver of investment activity, but it does serve as a proxy for economic importance of a city. High influx of international, predominantly North American capital, was the main reason behind Moscow’s rise in the H1 2013 investment ranking.