EUROPE - The growth in European real estate transactions continued to rise in the second quarter despite investor uncertainty over the sovereign debt crisis.

Separate sets of figures from Cushman & Wakefield and DTZ both showed transaction volumes increased compared with the previous quarter.

Cushman & Wakefield reported that deal volumes in the second quarter stood at €25.2bn, a 19% increase on the first quarter, while DTZ said investments totalled €21.4bn, representing a growth of 11%.

However, the recovery in the European transactions market was far from uniform, according to DTZ, with the UK and France accounting for most of the growth, while German transactions actually dropped in volume.

The company reported a quarter-on-quarter growth in the UK of 29% to €7.9bn, and 23% growth in France to €2.2bn.

In Germany, transaction volumes fell by 19% to €3.8bn.

Magali Marton, head of DTZ CEMEA research, said: "Uncertainty over the recovery in Europe's economies poses a downside risk to the recovery.

"This, combined with planned legislative changes to German open-ended funds, means we have seen a reduction in net flows to open-ended funds, which could hold back significant new investment in the short term."

Cushman & Wakefield warned its own headline figures looked good "on paper" and that they did not show the effects of growing investor uncertainty.

The market "hit a bump mid-quarter", according to the firm, as the sovereign debt crisis caused greater uncertainty and a fall in risk appetites, leading to a stabilisation in real estate yields.

That said, Michael Rhydderch, head of the cross-border team of the EMEA capital markets group at Cushman & Wakefield, was relatively optimistic about the outlook for the second half of the year.
"The largest and most active part of the market is still made up of low-risk investors focused on core product in large, liquid markets," he said.

"But there have been indications recently that more investors are willing to look toward value-add areas, at least in the most competitive and demanded markets, the UK and France.

"Yields are likely to take a little longer to compress than we had expected, but the very best assets and markets will see strong demand still driving yields down - particularly if bond yields remain as low as they are today."

Cushman & Wakefield reported that the core markets of France, Germany and the UK dominated transactions, accounting for 64% of all deal volume.

But it also noted that buying demand had spread to new areas, especially Norway and Sweden.

Central and eastern European markets had also returned to favour during the quarter, with volumes rising 61% (versus a Western European increase of 16%), led principally by Poland, Russia and Turkey.