European real estate investment declines in third quarter

Total real estate investment activity declined in the third quarter of 2012 to €24.6bn, a 3% decrease on the previous quarter, according to research from DTZ.

Over the past twelve months, volumes across Europe reached €108bn, an 8% fall on the €117bn recorded in the same period a year ago.

Uncertainties on the economic and financial landscape continue to mean investors are focused on the perceived safe havens of the UK, Germany and France. Combined these markets attracted 79% of activity in Q3, up from a 73% share in Q2.

Both the UK and Germany registered an increase in activity with volumes up 6% to €10.9bn and 20% to €4.9bn respectively. In France volumes slipped 16% to€3.5bn.  

Elsewhere market activity is constrained with Nordics falling by 39% to €2.4bn and CEE recording a 27% increase to €400m.  Investors continue to desert Ireland, Italy and Spain. Volumes in these markets fell 22% over the quarter to €400m. This reflects a 2% share compared to a longer run average of 10%.

Private property vehicles are still predominant in the European market spending €10bn of investment in Q3, up from €8.8bn in Q2. Institutions continued to be active on the buy-side (€2.7bn in Q3) with a net investment of €230million. Their activity on the direct investment market is now challenged by the strong position taken on the debt side.

Nigel Almond, head of strategy research at DTZ, said: “Over the quarter we have seen continued activity from Sovereign Wealth Funds as they take advantage of their strong equity positions in a debt constrained market. In Q3 they invested further €1.bn after investing €1.7bn in Q2. This took the year to date volumes to €3.5bn, which is more than double the €1.7bn they invested in 2010 and 2011 combined. These funds, from Asia Pacific, Europe and the Middle East are focused mainly on offices in core markets. We expect selective activity to continue, with Norges Bank Investment Management acquiring a 50% stake in the Meadowhall Shopping Centre, UK in Q4”.

Magali Marton, head of DTZ CEMEA Research, added: “The traditional rush to complete deals in the final quarter is likely to be tempered by the continued uncertainty in the Eurozone.  However, we remain confident that volumes will close the year at close to €100bn, around 10% lower than 2011 and on a par with activity in 2010. The European investment market will still be dominated by domestic investors but we anticipate more activity from intra regional investors, in line with our latest Great Wall of Money analysis. Inter-regional investors will continue to take position in a more opportunistic approach targeting specific asset type into selected markets and country.”