Post-pandemic recovery underway in European real estate investment market
Q3 2021 volumes up 55% on previous year and in line with pre-Covid levels
There is a notable recovery underway in the European real estate investment market, according to the latest figures from global real estate advisor, CBRE. European investment volumes totaled €77.3bn in Q3 2021, up 55% on the same period last year. This is higher than the Q3 volumes recorded in the previous five years, except for 2019, when volumes reached €78.8bn, signaling a return to pre-Covid activity levels. All major markets, except for France, saw an uptick in Q3 volumes compared to the previous year, including the Netherlands (123%), Germany (96%), the Nordics (94%), Spain (85%) and the UK (64%).
The strong Q3, which was driven by several large platform deals, including the €9.1bn sale of the Akelius platform in Germany and the Nordics, brings the year-to-date investment total to €208bn, up 10% from €189bn in 2020. This is despite Q1 2020 being the largest Q1 on record. The UK, the Nordics, Spain and Germany are leading the recovery, having posted year-to-date investment volume increases of 47%, 30%, 22% and 8% respectively compared to the same period last year. However, the rebound in volumes is not universal, with volumes for the first nine months of the year (Q1 2021 – Q3 2021) down on 2020 in several markets including France (-13%), Italy (-8%) and the Netherlands (-3%).
According to CBRE, there has been a significant uptick in Hotel investment volumes, with the sector showing a marked recovery following the pandemic. Hotel volumes were up 24% year-to-date and up 41% on Q3 2020 and there has been no visible distress in the market, as was anticipated at the start of the year.
The Industrial and Logistics and Multifamily sectors have also continued to perform exceptionally well. For the first nine months of the year (Q1 2021 – Q3 2021)), Industrial and Logistics investment volumes were 65% up on 2020, with Q3 2021 volumes also up 65% on Q3 2020. Year-to-date Multifamily investment volumes were up 20% on the same period last year and 143% up on Q3 2020.
Both sectors have also continued to increase their share of the total investment market. In the 12 months from Q4 2019 – Q3 2020, Multifamily represented 22% of the total European market, growing to 27% in the 12-month period from Q4 2020 – Q3 2021. Similarly, the Industrial and Logistics sector has grown its share from 12% to 19% over the same period. This is mainly at the expense of Offices, which has reduced its investment share from 38% to 31% but remains the largest investment asset class in Europe.
European Office investment in Q3 2021 was up 32% on Q3 last year and remained flat year-to-date. Meanwhile Retail investment in Q3 2021 saw an uptick of 20% compared with Q3 2020 but was 21% down on the first nine months of last year.
The recovery we anticipated is now well underway in many markets but, as we expected, the rate of recovery is slower in some parts of Europe than others. The positive sentiment from capital at EXPO Real in Munich this week points to a very active Q4 across all markets and so we expect the recovery we have seen in Q3 to continue and for 2021 volumes to exceed the total we saw in 2020. In light of the pandemic, we are seeing a flight to quality in the Office market, with the higher quality space which has strong ESG credentials commanding higher rents. As a result, we are beginning to see a polarization in the rental market, which is a trend we expect to become more visible across Europe over the coming months.