Europe a 'playground' for overseas real estate investors
GLOBAL - France, Germany and the UK accounted for 74% of European second-quarter transaction volumes as Europe became a target for inter-regional investors insulated from the debt crisis.
Data published this week by DTZ show non-European investors accounted for €5.3bn of volumes totalling €25.4bn, up 4% over the previous quarter but down 11% from the second quarter last year.
Authors Magali Marton and Kasia Sielewicz said Europe had become a "playground" for inter-regional investors, who would continue to support investment volumes in the second half of the year.
The UK led in Q2 with a 25% quarterly increase in volumes to €10.4bn, largely driven by private equity vehicles and private investors targeting UK deals worth more than €50m for the first time.
Middle East investors, including the Qatari sovereign wealth fund, continued to target the Paris market.
In contrast, CEE markets posted a 60% decline in transaction volumes to €334m.
"The fact 74% of all transaction volume took place in the UK, France and Germany alone highlights investors' preference towards the safety of large, liquid investment markets," DTZ said in a note.
"This trend is likely to continue until the situation in the euro-zone stabilises."
Domestic investment fell 11% to €13.6bn in Q2, although institutional investors continued to focus on retail and office in their domestic markets.
The focus on office reflects a broader trend, with office sales representing €12.8trn - more than 50% of Q2 investment activity.
The UK and France accounted for more than 60% of office activity, with quarterly declines in Germany - from €2.6bn in Q1 to €1bn in Q2 - Benelux and CEE markets.
DTZ reported no change in prime yields, adding that they were unlikely to fall below their current levels in the short term in core European markets.
In a separate note, DTZ revised downwards its rental growth forecasts for office from 1.4% to 1%, and for industrial from 0 .3% to -0.2%, citing weak occupier demand.
However, with exceptions such as Dublin, where rents have fallen by 60% since 2007, DTZ upgraded its retail rental growth forecast from 0.2% in Q1 to 1.9%.
"The paradox of prime retail rental growth was driven by stiff competition for retail locations with the highest retail spending catchments," it said.
"In an environment of falling disposable income and retail spending, it is a defensive move by retailers who are seeking to maintain access to customers."