Record investment volumes in Europe for Q1 2020 as impact of Covid-19 awaits to be seen
Record volumes in Q1 2020 supported by a Q4 2019 lag effect
Total real estate investment in Europe reached €85.5bn in Q1 2020, representing a 52% increase on the same period last year, according to the latest data from global real estate advisor, CBRE. This was a record Q1 performance for European CRE, surpassing the previous high seen in Q1 2015.
Preliminary investment volumes in the UK in Q1 2020 totaled €17.2bn, up 33% on the same period last year due to greater political stability following the parliamentary election results in December 2019. UK investment volumes in Q1 2019 were suppressed due to heightened uncertainty ahead of an agreement on the terms under which the UK would leave the EU.
Similarly, many of the major Continental European markets outperformed the first quarter of last year, with Germany, France, and Spain recording investment volume increases of 97%, 38% and 54% respectively. Performance across the major markets was driven by two exceptionally large platform deals in Germany, accounting for €10bn alone, and the £4.7bn purchase of the IQ student housing platform by Blackstone in the UK.
Additionally, investment volumes in Ireland were up 110% on Q1 2019, reaching €1.3bn, with Offices and Multifamily in Dublin recording particularly strong performances. Italy saw volumes increase by 7% to €1.8bn, driven by strong performances in Industrial and Logistics and Retail (High Street Mixed & Supermarket), whilst the Nordics also performed well, with Sweden recording a 97% increase on the same period last year due to the completion of the €3.1bn Hemfosa/SBB transaction. CEE also had a strong quarter relative to the previous year driven by an increase in investment in Poland and the Czech Republic. Other markets that showed a significant increase are Portugal, Belgium, and Luxembourg.
The strong performance in Q1 2020 in Europe was driven in part by a lag effect from the previous quarter, with many large deals that were initiated in the latter part of last year, completing at the start of this year. However, correcting for the large platform deals, investment volumes in Q1 2020 were still up 15% compared to the same period last year, equating to the 3rd strongest first quarter on record.
Whilst these volumes are not reflective of current market sentiment, and it won’t be until Q2 that the impact of Covid-19 on the European investment market will be seen, the strong performance in Q1 2020 is indicative of the amount of capital available to invest into European real estate and gives confidence investment volumes will regain strength once Covid-19 uncertainty fades.
The record Q1 performance we have seen across Europe serves to highlight how strong the appetite is from global investors for real estate assets. Since March of this year, we have seen a marked shift in sentiment due to the outbreak of Covid-19 and its widespread impact on communities, businesses and the economy across Europe. The true impact of this will not be seen until Q2, however, we expect the repercussions to be significant in the short term, with positivity and opportunity emerging in the mid to long-term as the industry begins its recovery. Real estate fundamentals enter this period of uncertainty in good shape and it will continue to perform well on a relative basis in the long term.